The Principles Of Economics, With Applications To Practical Problems - free ebook by Frank A. (Frank Albert) Fetter

PROFESSOR OF POLITICAL ECONOMY AND FINANCE, CORNELL UNIVERSITY

NEW YORK THE CENTURY CO. 1904 Copyright, 1904, by The Century Co . The DeVinne Press TO THE STUDENTS OF THREE UNIVERSITIES —INDIANA, STANFORD, AND CORNELL— FOR WHOM, WITH WHOM, AND BY WHOSE AID THIS BOOK CAME TO BE WRITTEN...

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PART I

PAGE The Value of Material Things 1 -169 DIVISION A—WANTS AND PRESENT GOODS CHAPTER 1 The Nature and Purpose of Political Economy: Name and Definition; Place of Economics Among the Social Sciences; The Relation of Economics to Practical Affairs 3 2 Economic Motives: Material Wants, The Primary Economic Motives; Desires for Non-material Ends, as Secondary Economic Motives 9 3 Wealth and Welfare: The Relation of Men and Material Things to Economic Welfare; Some Important Economic Concepts Connecte

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PREFACE

This book had its beginning ten years ago in a series of brief discussions supplementing a text used in the class-room. Their purpose was to amend certain theoretical views even then generally questioned by economists, and to present most recent opinions on some other questions. These critical comments evolved into a course of lectures following an original outline, and were at length reduced to manuscript in the form of a stenographic report made from day to day in the class-room. The propositi

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THE NATURE AND PURPOSE OF POLITICAL ECONOMY

1. Economics, or political economy, may be defined, briefly, as the study of men earning a living; or, more fully, as the study of the material world and of the activities and mutual relations of men, so far as all these are the objective conditions to gratifying desires. To define, means to mark off the limits of a subject, to tell what questions are or are not included within it. The ideas of most persons on this subject are vague, yet it would be very desirable if the student could approach t

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ECONOMIC MOTIVES

1. A logical explanation of industry must begin with a discussion of the nature of wants, for the purpose of industry is to gratify wants. An economic want may be defined as a feeling of incompleteness, because of the lack of a part of the outer world or of some change in it. Often the question asked when one first sees a moving trolley car or automobile or bicycle is: What makes it go? The first question to ask in the part of the study of economic society here undertaken is: What is its motive

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WEALTH AND WELFARE

1. The gratifying of economic wants depends on things outside of the man who feels the wants. Man is to himself the center of the world. He groups things and estimates things with reference to their bearing on his desires, be these what are called selfish or unselfish. If we were discussing the economics of an inferior species of animals, things would be grouped in a very different way. But economics being the study of man's welfare, everything must be judged from his standpoint, and things are

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THE NATURE OF DEMAND

1. As wants differ in kind and degree, so goods differ in their power to gratify wants. This general and simple statement unites the leading thoughts of the two chapters preceding. Confirmation of its truth may be found in observation and experience. The purpose of this chapter is to show how, starting from the general nature of wants and the nature of goods, we can arrive at an explanation of the exchange of goods. Recognizing the simple but fundamental fact stated at the opening of this paragr

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EXCHANGE IN A MARKET

1. Exchange in the usual economic sense is the transfer of two goods by two owners, each of whom deems the good taken more than a value-equivalent for the one given. The comparison of goods that has been discussed above is a kind of exchange. When a person chooses one thing rather than another, one form of gratification may be said to be mentally exchanged for another. This is exchange in that person's mind, or subjective exchange. But the word "exchange" as usually employed means an exchange of

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PSYCHIC INCOME

1. Satisfaction and gratification being only temporary conditions, economic wants appear in more or less regularly recurring series. Impressions are short lived, sensations are temporary, wants that have been satisfied recur. Wants recur for the same reason that they first arose. No impression on the nerves or on the senses is lasting. Man's senses were developed for the purpose of bringing him into relation with the outer world, of enabling him to survive in his struggle with the forces of natu

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WEALTH AND ITS INDIRECT USES

1. Goods may be ranked according to their technical relation to wants. The technical rank of goods (sometimes spoken of as the degree of roundaboutness of the process) signifies the number of steps or processes that intervene between the agent used and the desired form. If one wishing the hickory-nut hanging above his head must first pick up a stick to throw at it, the nut is removed one step from desire. But even among savages the processes are much more complicated. The Indian with a crude kni

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THE RENTING CONTRACT

1. The temporary use of materials and power and their sources is necessary to bring most enjoyable goods into being. Indirect goods have value solely because they help to get direct goods. The apple-tree is valued because it bears fruit, and the orchard because the trees give promise of yielding a succession of crops for years to come. There are thus two problems of value in connection with durable goods: that of the value of a temporary use for a brief period, as for a year; and that of the val

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THE LAW OF DIMINISHING RETURNS

1. The phrase "diminishing returns of industrial agents" is the expression of the fact that there is an elastic limit to the utility any indirect good can afford within a given time. Successive attempts to get additional services from a thing are usually in part successful, but each additional service is gained with more difficulty, or a smaller added service is gained for an equal expenditure of materials or effort. A book stands many hours untouched on the shelves of the library; but if, as of

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THE THEORY OF RENT: THE MARKET VALUE OF THE USUFRUCT

1. Both rent and the value of durable wealth are based on the value of the fruits or products yielded by the wealth. Gratification, afforded directly or indirectly, is the basis of all values. The relation of most kinds of wealth to wants is indirect; but gratification thus afforded indirectly is none the less the basis on which the usufruct of wealth is estimated. Men find the logical or causal connection between direct goods, or final product, and indirect goods, or agents. To explain the valu

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REPAIR, DEPRECIATION, AND DESTRUCTION OF WEALTH: RELATION TO ITS SALE AND RENT

1. The continued rent of indirect agents is dependent on the continual repair of certain parts necessary for their efficiency. All earthly things wear out or decay. Whenever man's hand is withheld, nature takes possession of his work, regardless of his purposes. Dust gathers on unused clothes, and moths burrow in them. Shut up a house, and windows are shattered, roofs leak, and vermin swarm. To close a factory is to hasten the time when buildings and machinery will be piled upon the rubbish heap

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INCREASE OF RENT-BEARERS AND OF RENTS

1. While man destroys some agents of production he multiplies many others. We have noted many kinds of depreciation, destruction, and wearing out of wealth; but the normal thing in a healthy society is an increase, on the whole, of rent-bearers. The increase of rents is due to two causes: changes in the agents by which they become more efficient technically, or more numerous; and changes taking place outside of the agents, affecting the utility of the products. The first of these will be conside

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MONEY AS A TOOL IN EXCHANGE

1. The exchange of goods by barter is extremely difficult in most cases. Thus far we have not considered the subject of money and have so far as possible avoided even the use of the term. Value in economics does not depend on money, and is not necessarily connected with it. Things can be compared in their utility, their importance to our welfare can be estimated, without the use of money. Many problems of economics can be discussed pretty thoroughly and solved without the use of the word money o

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THE MONEY ECONOMY AND THE CONCEPT OF CAPITAL

1. The use of money prevails in very different degrees in various parts of the United States. The members of this class, representing nearly every state and territory in the Union, have lived amid very diverse industrial conditions. Some know best the country where conditions are similar to those of a hundred years ago; some, the villages where may be seen the handicrafts and the small general store. Others know better the cities with their varied industries; while doubtless still others, throug

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THE CAPITALIZATION OF ALL FORMS OF RENT

1. From the twelfth to the sixteenth centuries the sale and purchase of rent-charges was the most general form of borrowing and lending wealth. A rent-charge in the Middle Ages was a definite income that was to be paid out of the rents of an estate, business house, manor, etc. The property was said to be "charged" with the payment of that income, and some estates were passed on for generations from father to son charged with a certain rent. It was thus possible for the owner of money to buy a re

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INTEREST ON MONEY LOANS

1. Interest, the amount paid according to contract by one person to another for credit given in terms of money, is but one expression of a larger problem, that of the difference in present worth of goods at two periods of time. This larger problem appears under several forms: first, as a difference in value, due to time, where there is no money expression (to be considered in the following chapter); second, in discount on a money loan for a short, definite time; third, in a long-time money loan

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THE THEORY OF TIME-VALUE

1. Time-value is the difference between the values of things at different times. Things differ in value according to form, place, quality of goods, and according to the feelings of men, and—not least important factor—according to time. The simplest and clearest case of time-value is the difference noticeable in the same thing at different moments. Is this good worth more now or next week? Shall this apple be eaten now or next winter? These questions can be answered only after comparing the margi

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RELATIVELY FIXED AND RELATIVELY INCREASABLE FORMS OF CAPITAL

1. Men seek to increase income by increasing capital. Men may strive to increase their rents without expressing the rent-bearer in terms of capital. Peasant owners and small proprietors, toiling fondly on their little estates, seeking steadily a larger crop, a larger income, accomplish wonders in bringing waste land to a high state of cultivation. Working on the soil that is at once their livelihood and their home, they do not consciously reckon the value of the labor they are putting upon it. N

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SAVING AND PRODUCTION AS AFFECTED BY THE RATE OF INTEREST

1. In the case of consumption goods, present marginal uses are often less than future uses as judged at the present. The proposition that future goods sometimes have a greater instead of a less value than present goods may at first seem to deny the general fact of economic interest, which is a premium on present over future goods. The contradiction is only apparent, however, and the proposition is merely a proper interpretation of the theory of interest. The assertion that present goods have gre

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LABOR AND CLASSES OF LABORERS

1. Labor is any human effort having an aim or purpose outside of itself. It is difficult to define satisfactorily the term labor. No definition will quite mark off all the cases. The efforts put forth by men may be classified according as they are pleasant in themselves, and according as they have separable useful results. These two factors combine to form four groups of actions. The fourth combination is not found in rational life, for no motive exists to do a painful act for a useless result.

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THE SUPPLY OF LABOR

1. The supply of labor means here not the number of workers available in any one industry, but the number available in the whole field of industry. The individual employer thinks of the supply of labor as consisting of the men seeking employment in his special industry. In this view it is the demand by the employers that apportions the workers among the various occupations. The social view of the supply of labor, however, looks at the whole field. The demand for labor is then seen to be represen

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CONDITIONS FOR EFFICIENT LABOR

1. The efficiency of labor, in its broadest sense, is its ability to render services or produce things that minister to welfare. The efficiency of labor is a resultant of many influences. In part it depends on the physical and mental powers of men; in part on things outside of the worker that either stimulate and strengthen him, or give him more favorable conditions in which to work. These are respectively the subjective and the objective factors of efficiency. In its broader sense, therefore, t

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THE LAW OF WAGES

1. Wage in the broad sense is the income due to labor, in distinction from that due to the control of material agents. The uses of material agents, studied under the subject of rent, are sometimes called "material services." The adjective refers to the source or bearer of the use, and does not imply that the service is to be thought of as a material thing. In its last analysis a service is never a material thing, but a psychic effect on men and their wants. Material services and human services a

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THE RELATION OF LABOR TO VALUE

1. The law of wages must be considered in connection with other far-reaching influences. One may use the sentence, "the marginal productivity of labor determines wages," without having a true understanding of its meaning. Memorizing a definition is only the first step toward economic reasoning. Till that definition becomes a real thing in the student's thought it helps him but little. The law of wages is an abstract statement of the logical relation of wages to utility; it is not a concrete stat

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THE WAGE SYSTEM AND ITS RESULTS

1. The wage system is the organization of industry wherein some men, owning and directing capital, buy at their competitive value the services of men without capital. The wage system is a method of organization never found completely realized. A community made up entirely of independent small farmers, living each on his little patch of ground, does not have any essential feature of the wage system. So long as they continue to be independent small farmers, owners of small capital, self-employing

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MACHINERY AND LABOR

1. A machine is a mechanical device by which power is applied in an automatically repeated manner, to change the place or form of things. It is not easy, perhaps not important, to distinguish the machine from the tool in every case. Tools are portions of matter, such as bone, wood, iron, which man guides and directs in applying his energy to things. A machine may be used by the foot, but the hand is the great tool-using member. In many cases there is a clearly marked distinction between tool and

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TRADE-UNIONS

1. A trade-union is an association of wage-workers for purposes of mutual information, mutual help, and for the raising of wages. The term trade-union is used in a general sense both of combinations of workers in the same trade, and of men in different trades, though usually the latter are called labor -unions. The "Knights of Labor" is a good example of the labor-union, the "American Federation of Labor" of a combination of trade-unions. The Knights of Labor is composed of local branches to whi

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PRODUCTION AND THE COMBINATION OF THE FACTORS

1. The aim of industrial effort is the increase of the quantity and quality of scarce goods; this is economic production. The thought has become familiar to the student that the supply of economic resources of whatever sort is limited, while the wants are practically unlimited. A supply of consumption goods meets a perennial stream of wants, the result being that value is attributed to things. The aim of production is to add to scarce things, to make the supply of goods as large as possible. The

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BUSINESS ORGANIZATION AND THE ENTERPRISER'S FUNCTION

1. In the simplest kinds of individual production the value of the results depends largely on intelligent choice. Even for the solitary worker the choice of the right time to do work is most important. The first thing Robinson Crusoe did was to turn to the ship to save as much as possible of the cargo before it was dashed in pieces by the waves. If he had begun first to till the soil to provide a future supply of food it would have shown one kind of foresight, but it would have shown very poor j

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COST OF PRODUCTION

1. The task of the enterpriser is to get together the essential factors to secure valuable products. The enterpriser must first decide what product he will endeavor to secure, and the kind, the place, the time, the quantity, and the quality. He must then select in the right proportion the materials, labor, plant, and machinery necessary for that product. He must purchase these factors in the market at the lowest price he can, unite them and sell the product to recover the expenses in the selling

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THE LAW OF PROFITS

1. The term profit is popularly used as any gain or advantage secured by any means in business. The terms used in economics, being taken from popular language, vary in meaning according to the context. It is necessary to clear thinking to reject some words entirely and when using others to define them more strictly. The broad usage of the term profits just noted includes every kind of return to industry: such as interest on capital, and wages or services of the man owning the industry. Precise t

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PROFIT-SHARING, PRODUCERS' AND CONSUMERS' COÖPERATION

1. Profit-sharing is rewarding labor with a share of the profits in addition to contract wages. The essential mark of profit-sharing is that the additional payment depends on the net profits of the whole business at the end of the year. It is not to be confused with a free gift, or with special privileges granted by the employer, such as lunch-rooms, bathrooms or houses at a low rent. Profit-sharing is a contract made in advance, not a free gift. Nor is it the same as a bonus or premium for a la

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MONOPOLY PROFITS

1. The term monopoly is used loosely and in many senses. In popular discussion monopoly means almost any wealthy corporation or the power the corporation possesses, a power which is usually thought of as oppressive. Even economists have held the vaguest ideas regarding monopoly. The recent rise of trusts and monopolies has given a large new body of facts bearing upon the subject, but all the resulting discussion by the public and by economists has not brought agreement upon a definition entirely

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GROWTH OF TRUSTS AND COMBINATIONS IN THE UNITED STATES

1. In the discussion of the so-called trust problem three things must be distinguished: large individual capital, large production, and monopoly power. Capital, in the sense of valuable agents, is found in the smallest as well as the largest industry, and every owner, from the small shop-keeper to the wealthiest bondholder, is a capitalist. In popular discussion, however, the word frequently implies great wealth in a single hand, though this wealth may be invested in a large number of small indu

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EFFECT OF TRUSTS ON PRICES

1. The economist's task, strictly confined, is to explain the relation of trusts to prices, not to solve the problem of their political control. The question of trusts is such a large one that its discussion here must be confined to those aspects having close relation to the central subject of economic study,—the laws of value. These laws were by the older economists thought to be true only within the limits of free competition. Seeing that in various ways this freedom is interfered with not onl

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GAMBLING, SPECULATION, AND PROMOTERS' PROFITS

1. Many forms of chance are inseparable from the individual enterprise. There are what may be called natural chances chances, arising from the uncertainties of the seasons, from rainfall, heat, hail, storm, flood, lightning, land-slides. Such chances must be taken both by the small enterpriser and by the large. In an earlier condition of society natural chance almost dominated industry, and it still remains and must always remain an important factor to deal with. There are political chances, as

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CRISES AND INDUSTRIAL DEPRESSIONS

1. In a broad sense, a crisis is a decisive moment or turning point; hence, in industry, a collapse of prosperity. In the course of a fever the crisis is the point where there is a turn for the better or for the worse. The figure of speech as applied to industrial conditions would seem to fail, in that what precedes is apparently exuberant health, not disease. Business conditions do not move along uniformly. There are waves of prosperity. Profits are apparently great, then may be suddenly swept

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PRIVATE PROPERTY AND INHERITANCE

1. Under the title "the social aspects of value" are to be considered the influences exerted upon incomes by various social acts, ideals, and institutions. The incomes from the wages of free labor and those from the rent of wealth, as studied in the abstract theory of value, are alike in their impersonal aspect, their relation to utility. But while wage flows from a personal source—is an income appearing to reward the personal effort of the laborer, the income of the wealth-owner is due to the u

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INCOME AND SOCIAL SERVICE

1. Property rights must meet the test of social expediency. If private property is defended on the ground of social expediency, it must show good social results. It is not a sacred thing; it is open to examination, and must be judged by its fruits. Of all the forms of income, that from property has been most strongly attacked. The thought is that enjoyment of wealth should not be found apart from labor, and that it should bear some proportion to services performed. The enjoyment of an ample inco

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WASTE AND LUXURY

1. The accidental destruction of wealth is a loss to the owner, rarely with benefit, on the whole, to others. In the consumption of wealth the loss of its utility is accompanied by the gratifying of wants; in the destruction of wealth utility is lost without the gratifying of wants. In a simple society, without exchange, the result of such a loss is evident. If food is destroyed, men suffer from hunger or gratify appetite less perfectly; if clothing is destroyed, they are cold; if houses are des

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REACTION OF CONSUMPTION ON PRODUCTION

1. Economic consumption is the enjoyment of the utilities which wealth is capable of affording. All wealth looks toward consumption. To take away the prospect of the enjoyment of goods is to take away all their value. Consumption involves generally the using up of a thing. Food is consumed quickly, clothing more slowly, and houses wear out after many years. The using up is, in some cases, due to the forces of nature, and is not hastened by enjoyment. A house goes to ruin more rapidly if uninhabi

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DISTRIBUTION OF THE SOCIAL INCOME

1. Personal distribution, in economics, is the reasoned explanation of the ways in which income is divided among the members of the community. Before noting more exactly the ways in which distribution can and does take place, it may be well to review briefly some definitions that have been given in other connections. Distribution is bound up in practice with production, but it can be thought of as a more or less distinct problem. Functional distribution is the attribution of value to agents or c

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SURVEY OF THE THEORY OF VALUE

1. The beginning and end of economic study is man. Before leaving the more theoretical and abstracter part of the theory of value, it may be well, at the cost of some repetition, to restate and review the relations of the various parts of the argument. Intent on details of the theory of value the student is in danger of losing its broader perspective. The proposition with which this section opens was accepted as our axiomatic starting-point. It was not so in the older political economy; men too

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FREE COMPETITION AND STATE ACTION

1. Economic freedom exists when men's goods or their own services may be exchanged as they choose, without hindrance. Competition is but another expression for economic freedom. Where men are free to exchange their goods and to get the best price they can, and actually do so, they are said to compete. The action of men in the mass follows pretty regular lines, corresponding to certain abiding motives. If one man dictated all industry, a very fragmentary science of economics would be possible; bu

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USE, COINAGE, AND VALUE OF MONEY

1. Money we have defined as a material means of payment and medium of exchange, generally accepted and passing from hand to hand. The origin and function of money were set forth in the study of capital. The subject must now be approached from a different side and with the two-fold purpose of seeing whether there is anything peculiar in the relation of money to the general problem of value, and what is the influence of the action of the state on the value of money. The definition of money implies

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TOKEN COINAGE AND GOVERNMENT PAPER MONEY

1. When the number of coins issued is limited properly, a seigniorage charge does not reduce their money value; they are worth more as money than as bullion. The coinage thus far considered has been that of full-weight coins without seigniorage. The question now is, What is the effect of a seigniorage charge on the value of the coin as compared with the bullion that is in it? This is one of the most difficult phases of monetary theory. Two values must be thought of: one the value of the coin as

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THE STANDARD OF DEFERRED PAYMENTS

1. The standard of deferred payments is the thing of value in which, by the law or by contract, the amount of a debt is expressed. A credit transaction is a lengthened exchange; one party fulfils his part of the contract, the other party promises to give an equivalent at a later date. The equivalent may be in any kind of goods; for example, in barter one may part with a horse on the promise of a cow to be received later; or a small horse on the promise of a large one; or a flock of sheep on the

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BANKING AND CREDIT

1. A bank is a business whose income is derived chiefly from lending its promises to pay. Banks have passed through many changes in the past three centuries. Originating on the street corner for exchange of money, they have evolved into great institutions of many forms, and performing many functions. The definition seems paradoxical, but it expresses what in modern thought is the essential feature of a bank: the lending of its credit. A reserve of money is needed by the man of business. But for

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TAXATION IN ITS RELATION TO VALUE

1. Provision for the expense of organized government is the fundamental purpose of taxation. Taxation may be defined as the taking by the government of private property for public uses. This implies a certain degree of compulsion. When the national government accepts ten million dollars in trust for the Carnegie Institution, it is not taxation, though wealth is given for public uses. The effects of taxation pervade all industrial affairs, but they will be discussed here only in relation to the v

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THE GENERAL THEORY OF INTERNATIONAL TRADE

1. International trade is exchange between individual men, and has the same object as other exchange of goods. The term international trade should not be misunderstood as meaning that nations rather than individuals engage in it. International trade differs from domestic trade only in the fact that the parties are citizens of different sovereign states. Exchanges between men in the same village, between those in neighboring villages, and between those in different countries, are prompted by esse

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THE PROTECTIVE TARIFF

1. A protective tariff is a schedule of import duties so arranged as to give appreciably more favorable conditions to some domestic industries than they would enjoy with free trade. Tariff duties were first laid to get revenues for the government. The first effect of the tariff is the same as that of any tax that enters as a new factor into enterpriser's cost—the domestic price of the taxed article tends to rise. Other results then follow. If the article cannot be produced within the country (as

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OTHER PROTECTIVE SOCIAL AND LABOR LEGISLATION

1. Under modern conditions many laws restricting free competition are required to secure the health and convenience of the citizens. The rapid growth of city populations has brought new social and economic problems. The friction in social relations is greater when men are crowded together. In 1790, three per cent. only of our population lived in cities of over eight thousand; to-day the percentage is thirty-three. Then the city dwellers numbered one hundred and thirty-one thousand; now they numb

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PUBLIC OWNERSHIP OF INDUSTRY

1. Local political units generally acquire only industries whose products must be used in the place where produced. The word industry is used here in a broad sense, including agents of psychic income not usually so classed, such as public parks. The grouping of publicly owned industries according to the size and importance of the political units cannot be exact, because some classes of industries are owned by several kinds of political units. Yet, especially with application to American conditio

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RAILROADS AND INDUSTRY

1. Transportation of goods and men is one of the most important modes of production. When utility was thought of as inherent in things rather than as resulting from a relation between things and wants, it was usual to consider only those industries as truly productive that brought something physical into existence, as do agriculture and the extractive industries. Even after it was recognized that a change of form also imparted value, it was still denied that a changing of place could be truly pr

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THE PUBLIC NATURE OF RAILROADS

1. Railroads enjoy peculiar public privileges through their charters, franchises, and the right of eminent domain. Railroads in our country are owned by private corporations and are managed by private citizens, not, as in some countries, by public officials. They have been built under the motive of private enterprise, in the interest of the investor, not as a charity or as a public benefaction. Railroad-building appears thus at first glance to be a case of free competition where public interests

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PUBLIC POLICY AS TO CONTROL OF INDUSTRY

1. The great increase of late in the number of industries under corporate control has brought new problems of social regulation. Inventions, machinery, better transportation, better communication, widening markets, have united to favor large-scale production, and this in turn to multiply corporations. Corporate organization makes possible greater massing of capital, greater stability of policy, and (because not dependent on a single life) greater permanence than does individual ownership. With t

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FUTURE TREND OF VALUES

1. The meaning and scope of economics can be better seen at the end than at the beginning of its study. The proposition with which this inquiry opened may well be recalled in the closing chapter. The words of the formal definition of economics should at this point convey a fuller meaning. In the wide range of subjects passed in review has been sought the answer to one question: What determines and affects the values of good? Perhaps now also can be better appreciated what the influence of such a

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Chapter 1. The Nature and Purpose of Political Economy

1. Has political economy anything to do with woman suffrage, the liquor problem, a republican vs. a monarchical form of government, the silver question? 2. Is political economy a study of things or of men? 3. Shall a piece of coal be studied in geology, botany, physics, chemistry, or economics? 4. Do you expect to acquire wealth more easily as a result of the study of political economy? 5. Of what practical use do you think political economy is? 6. Is political economy necessary to the understan

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Chapter 2. The Economic Motives

1. If you found $10 to-day on the street, what would you do with it? 2. What would be the chief differences between your use of it now and at the age of five or the age of twelve? 3. Name Crusoe's wants in the order of their importance. 4. Is it well to be contented with your lot? Is it well to be discontented? 5. Why does a horse like hay and a man prefer meat? 6. Are the wants of a savage more easily satisfied than those of civilized men? Why? 7. How many motives led you to come to college? 8.

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Chapter 3. Wealth and Welfare

1. What is it to be economical of money? 2. Why did Crusoe work at all? 3. When he began to work at one thing, why did he ever stop to work at another? 4. What is the difference in utility between the water in a solid mountain reservoir and the same water when it is flooding the valley? 5. Does it change the utility of a load of powder to touch a match to it? 6. Is water useful? Is dynamite? 7. Is the last bait worth more when the fish are biting well? 8. Are the following wealth: food, tobacco,

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Chapter 4. The Nature of Demand

1. Give illustrations of the difference between desire and demand. 2. Do people actually expend their incomes so as to get the maximum utility judged by a standard they would admit to be morally sound? 3. What causes a demand for an additional supply of food? Of books? 4. If you never eat corn-bread, will the failure of the corn-crop affect your grocery bill? 5. Give examples you have seen of a higher price of one thing causing an increasing use of another. 6. Do you buy what you most desire? 7.

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Chapter 5. Exchange in a Market

1. Are merchants producers of wealth, or are their profits merely subtracted from the wealth already produced? 2. Is the railroad productive? Why? 3. Give examples within your observation of improved productive processes increasing exchange; of the reverse. 4. Why is exchange profitable if it is fair? 5. Would doubling all commodities affect their exchange value? 6. Is part of a stock of goods ever worth more than the whole? Examples. 7. Do you ever take account of a difference of five cents in

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Chapter 6. Psychic Income

1. Is it possible to compare the value of the portrait-painter's service with that of the gardener? 2. To call the teacher's work unproductive, and the ditch-digger's work productive was once usual, but is so no longer; give reasons for either view. 3. It is usual to call the use of a house for business purposes a productive use, but its use as a residence an unproductive one. What reasons are there for and against this? 4. Give a list of material agents that are yielding non-material uses. 5. G

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Chapter 7. Wealth and its Indirect Uses

1. Give reasons for attributing exchange value to the waves of the ocean; to a waterfall, a water-wheel, a loom, a piece of cloth, a dress made of the cloth. 2. Show the connection between these things. 3. How can the use of a flock of sheep be of value to one who must return them all to the owner? 4. Why should the use of a machine that never can be a direct cause of gratification, have a value that men will pay for? 5. Give examples of wealth never becoming a direct cause of gratification, yet

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Chapter 8. The Renting Contract

1. What things beside land are rented? 2. What is the form of contract used in the renting of farms, business buildings, and residences, in the community where you live? 3. Does the rent of pianos, type-writers, or masquerade-suits depend on the value of the thing rented? Is the rental a moderate return on the investment? 4. What are the difficulties in determining tenants' improvements? Note. —Various writers have recognized that social, class distinctions had an influence on the conceptions of

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Chapter 9. The Law of Diminishing Returns

1. Is it possible to do twice the amount of business in any store-room by doubling the stock and the force of clerks? 2. Is it possible to expand a university indefinitely by increasing the force of teachers and the equipment, without enlarging the buildings? 3. Why do men cultivate two acres instead of one? Where land is plentiful, why do not men cultivate two acres instead of one? 4. Are there any things, not free goods, that could be indefinitely increased without increasing difficulty? 5. En

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Chapter 10. The Theory of Rent

1. Is competition severe in the renting of land in your community? 2. Give examples you have seen of a rise of rent; the cause. Of a fall of rent; the cause. 3. Does the existence of the land of California have any effect on rents in New York city? On agricultural rents in New York state? 4. If all the land on an island were equally fertile and equally convenient of access, would any of it pay a rent? 5. If you owned the Golden Gate, or the harbor of New York, could you rent it? 6. How does the

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Chapter 11. Repair, Depreciation, and Destruction of Wealth

1. What is the difficulty in the definition: Rent is the payment for the original and indestructible powers of the soil? 2. If the value of improvements on land is all counted, is there anything over? Examples. 3. What is stumpage? Does it differ from rent? 4. What do you know about the methods of renting mines? 5. What methods are adopted to keep up the efficiency of factories? Note. —Compare and note the inconsistent use of the term "rent" by Ricardo, pp. 34-5 and 45-6, McCulloch's edition. Se

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Chapter 12. Increase of Rent-bearers and of Rents

1. What are the most obvious ways of increasing the productiveness of land? 2. How does a new railroad affect the value of the land it passes through? 3. How would the rent of a rocky island be affected if it became a summer resort? 4. Mention any cases you may have seen where a greater value was imparted to land by a newly discovered use. 5. A tunnel was made to drain a mine; the stock doubled in price. Was it really the stock, the old mine, or the new hole in the mountain-side that had increas

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Chapter 13. Money as a Tool in Exchange

1. Why do you value money? Do you value it more than the things it buys? 2. What functions does money perform in society? 3. Could a country better do without money, horses, or roads? 4. If money is a tool, what does it make? 5. What is the difficulty in deciding whether to call the following money: gold ingots, gold coin, silver dollars, copper cents, greenbacks, bank-checks, chalk-marks to keep account? 6. Are men wealthy in proportion to the money they have? Are countries? 7. Would a nation b

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Chapter 14. The Money Economy and the Concept of Capital

1. Are national bonds or promissory notes, wealth? 2. Is it money or things that the borrower wants? 3. If you were starting a factory on credit, would you rent the machines or buy them with borrowed money? Why? 4. When a man says he has a certain capital invested in his business, does he mean to include the value of the land and buildings? 5. What is the meaning of the phrase, "a capitalistic age"? Note. —We are indebted to the economic historians for a better understanding of the important inf

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Chapter 15. The Capitalization of all Forms of Rent

1. What relation is there between the rate of interest and the price of land bearing a given rental? 2. If a $100 share of railroad stock sells at par when interest on loans is at 5%, what will be its price when interest rises to 6%? When interest falls to 4%? 3. If a business is very successful and its dividends double, what will be the effect on the selling price of its stock? Note. —The subject is almost foreign to the standard works on economics, which have continued to look upon capital as

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Chapter 16. Interest on Money Loans

1. Some money-lenders in cities get 10% a day from fruit-vendors for the advance of small sums of money, and the losses are very slight. Pawnbroking pays frequently 25 to 100% per year. In these cases what affects the rate of interest? 2. Through what agency does the Western farmer borrow Eastern capital? 3. How do Englishmen invest in American railroads? 4. In what ways can a lender collect a high rate of interest without appearing to do so? 5. What would be the effect upon the rate of interest

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Chapter 17. The Theory of Time-value

1. Give examples of a high cost for the use of wealth without the borrowing of money. 2. Give some examples of the neglect of repairs through lack of resources, and show how it involved time-value. 3. What would be some of the first effects on production if interest on money loans fell to one half its present rate? 4. Which is the more important for the rate of interest, the amount of money in the banks or the amount of goods in the country? 5. How would the rate of interest be affected if the a

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Chapter 18. Relatively Fixed and Relatively Increasable Forms of Capital

1. Why not raise seals in California and fruit in Alaska? 2. Has the rainfall any relation to the density of population? 3. Has the isothermal line any relation to the number of millionaires? 4. What physical reasons account for the greatness of ancient Egypt, of Venice, of Holland, of England, of the United States? 5. Is all land useful? Is all land wealth? 6 Is there a different term for land that is wealth and land that is not? 7. Are there different economic terms for hewn and unhewn blocks

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Chapter 19. Saving and Production as Affected by the Rate of Interest

1. The savings of the people of the United States are nearly a billion dollars a year. What and where are they? 2. What are the main social conditions necessary to saving? 3. What influence has commercial morality on saving? 4. Do savings-banks and insurance companies stimulate saving, or do they exist because of a disposition to save? 5. What influence has the formation of joint-stock companies on saving? 6. Will you save more or less if the rate of interest falls? 7. Distinguish between hoardi

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Chapter 20. Labor and Classes of Laborers

1. Is dancing labor? Is the dancing of a dancing-master labor? If he would rather dance than eat, is it labor? 2. Enumerate some kinds of labor necessary to produce bread. 3. "Washing of clothes is unproductive labor; therefore as little of it should be done as possible." Criticize the argument. 4. Would you say that differences in ability at manual trades are due to practice or to native talent? If to both, in what proportion? 5. Do sons usually follow the father's trade? Is it more or less com

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Chapter 21. The Supply of Labor

1. Has the principle of the survival of the fittest any influence on the population of America? 2. What limits the number of wild rabbits? Of tame pigeons? Do the same influences act in the case of men? 3. What other influences affect population? 4. What relation is there between population and mountains, temperature and water-supply? 5. It has been said that the supply of labor is fixed by biologic laws. Is it therefore not subject to economic influences? 6. What application do you think the pr

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Chapter 22. Conditions for Efficient Labor

1. Is hunger the cause of food? 2. Is there any relation between a republican form of government and the growth of manufactures. 3. What are the necessary conditions to the building of a house: ( a ) natural forces; ( b ) changes in material things; ( c ) human activities; ( d ) social conditions? 4. Is the public school system an economic factor? Where among the four preceding heads would you classify it? 5. From an economic standpoint, can we say that robbery really reduces the wealth in exist

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Chapter 23. The Law of Wages

1. What is the effect of free common schools on the comparative wages of skilled and of unskilled laborers? 2. What would be the effect of technical and industrial schools on the wages of artisans? 3. If a man is not content with $2 a day, why does he not do work that is paid $5 a day? 4. What is the effect on wages of differences in the danger, pleasurableness, social distinction, expense of preparation, of occupation? 5. If women are paid less than men for the same work, why are men employed a

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Chapter 24. The Relation of Labor to Value

1. May a singer of songs or a mixer of drinks be called a productive laborer? 2. Are fine products high in price because wages are high, or vice versa? 3. Is common, unskilled labor "scarce" (in any reasonable sense of the word) in China? in the United States? 4. Can a manufacturer pay the same to laborers if the product will be marketed next year, as he can if it is to be marketed to-morrow? If so, how is the value of the labor adjusted to its product? Note. —An able discussion of the effect of

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Chapter 26. Machinery and Labor

1. Do you think that the amount of work is reduced by new machinery? Point out ambiguities in the question. 2. What is the difference to the workman whether he becomes more efficient or works with a better machine? 3. Is the work of any kind fixed in quantity? What would cause it to change? 4. What kinds of laborers were thrown out of employment by the invention of the type-writer? What kinds of labor found employment as a result of its invention? Was the net result a gain or a loss of employmen

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Chapter 27. Trade-unions

1. Does it make any difference in the permanence of an increase of wages brought about by a strike, whether the employer is one of the more successful or one of the less successful in that business? 2. Is there any similarity between the methods of trade-unions and the etiquette of the medical and the legal professions? 3. If you were an officer of a trade-union, would you begin a strike when trade was good or when it was poor? 4. If you can do more work in two hours than in one, can you do more

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Chapter 28. Production and the Combination of the Factors

1. What is production? Does the economic idea of production conflict with the physical principle that matter cannot be created? 2. Is it production to buy fifty cents' worth of yarn and knit a pair of socks worth twenty-five cents if you enjoy doing it? If you do not enjoy it? 3. Give examples of factors of production. 4. What factors of production must be combined by a savage to produce a canoe? 5. Outline the combination of factors that has produced New York bread made from Minnesota wheat. 6.

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Chapter 29. Business Organization and the Enterpriser's Function

1. What is the relative importance of organization in sawing wood, building houses, running a small store, or a large factory? 2. Which wins the battle: the general, the soldiers, or the armament? 3. What determines whether a crop is poor or good: the ground, the weather, or the farmer? 4. Why do some businesses give increasing returns as they grow? 5. One has said: "The natural differences in powers and aptitudes are certainly not greater than are natural differences in stature." Is this sound

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Chapter 30. Cost of Production

1. What is the cost of a good you have made entirely with your own labor? 2. What is the difference to the employer between rent, interest, and wages as items of cost? 3. Is there anything in common between "cost, the onerous exertion necessary to get goods," and cost as the money expenses of production? 4. Why does a merchant engage in one business rather than in another? 5. When prices fall, what determines which factories shall close, and which workmen shall be discharged? 6. Does the value o

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Chapter 31. The Law of Profits

1. Business being poor, one employer is making good profits; how different will be the wages he pays from those paid by the unsuccessful employer? 2. How many of the men you know at the head of large businesses started life poor? 3. Was the rise in fortune due most often to chance, inheritance of wealth, or exceptional ability and power of work? 4. How should the income of an inventor be classified, as wages or profits? 5. Are the profits of the employer deducted from wages? Are the high wages o

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Chapter 32. Profit-sharing, Producers' and Consumers' Coöperation

1. Describe any case of profit-sharing you may have seen in operation. 2. Is advertising of any social service or is its sole purpose to divert trade from one merchant to another? 3. In what ways are retail stores wasteful in their expenditures? Can this be avoided? 4. If you have seen a coöperative store in operation tell what was its success. 5. Are you willing to pay more for goods in order to have a choice of stores?...

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Chapter 33. Monopoly Profits

1. How is the blacksmith free to compete with the physician and how not? In what sense have we assumed that competition exists? 2. Is there competition between the owner of good land and the owner of poor land? 3. Has the owner of a poor gold-mine a monopoly? Has the owner of a rich mine a monopoly? 4. Does the ownership of land give a monopoly? The ownership of a horse? 5. In what sense is a street-railway a monopoly? What is the value of its franchise? 6. Why does the public consent to grant p

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Chapter 34. Growth of Trusts and Combinations

1. What advantages are there to manufacturers in combination? What to the public? 2. What relation has improved transportation and other means of communication to trusts? 3. Name as many economic monopolies as you can. 4. What large trusts have recently been formed? 5. Does the public consider the growth of trusts to be good or bad? What do students of the question think of it?...

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Chapter 35. Effect of Trusts on Prices

1. Can the large factory always outsell the small one? Why? 2. Why are trusts or selling agreements formed? 3. Describe any agreement of which you know, made between merchants or manufacturers for the purpose of regulating prices. Did prices go up or down as a result? 4. Would it be a good thing for society if a trust made great economies in production, crowded out its smaller competitors, and maintained prices just where they were before, dividing among its shareholders the amounts saved? 5. Ho

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Chapter 36. Gambling, Speculation, and Promoters' Profits

1. Do you think that store-keepers fix the price of the produce they buy of the farmers? If so, to what extent? 2. Can brokers fix the price of grain on the market? How, and to what extent? 3. What is speculation? Give examples you have seen. 4. Were they, on the whole, good for the community? 5. Give other examples showing the difference between a gambling-house and an insurance company? 6. Is the immorality of betting based on economic grounds? 7. Ought lotteries to be permitted by law? 8. Oug

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Chapter 37. Crises and Industrial Depressions

1. What is a financial crisis? An industrial depression? 2. Define the expressions "over-production" and "under-consumption." 3. In a period of depression is there less money than usual in the country? In the banks? 4. If there were twice as much money in the world, would panics take place? 5. Before a financial crisis how are prices, high or low? After a panic? 6. What economic changes occurred in your own community in the panic of 1893-4, or in the years 1903-4? 7. Do people save more in good

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Chapter 38. Private Property and Inheritance

1. If the law permits certain classes to be fleeced without redress, is wealth thereby reduced? 2. What are vested rights? Do they ever stand in the way of progress? Examples. 3. Is it right that the lucky inventor of a popular toy should make $100 a day from it? 4. Is it right that an inventor should by patent laws be able to keep the profits of his business high? 5. Do you know of any father who created more wealth because he could bequeath it to his son? 6. Does the son work as hard when he i

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Chapter 39. Income and Social Service

1. What is it to earn a living? How many people do it? 2. When is a man poor? 3. Would it be a good thing if the boot-black got a dollar a shine? 4. Does luck have greater influence on business success in an old country or a new one? 5. Ditto in agriculture, mining, commerce, or manufactures? 6. A rare coin and a piece of land sold for the same price one year, and the next year both sold for double the amount. Was there an unearned increment in both cases, and of the same kind? 7. If rewards wer

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Chapter 40. Waste and Luxury

1. Can we determine what luxury is, or give the notion definiteness? 2. Do you feel a sense of injustice when you read of a millionaire's ball if you are not a millionaire? 3. Can you excuse the sense of injustice felt by the hungry man when he sees you wear patent-leather shoes and kid gloves? 4. Under private property, can men complain of the use made by others of their wealth on the ground merely that it was unwise? 5. Is luxury necessary to give employment to labor? 6. Is the spendthrift the

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Chapter 41. Reaction of Consumption on Production

1. What are complementary goods? Give some illustrations. 2. Can people live on the future, consuming in advance of production? How is it with the nation in time of war? 3. Does economic theory throw any light on the ethics of miserliness? 4. It is said that the demand of the day-laborer for cheap white shirts has reduced the wages of the women who make them. Criticize. 5. What effect on wealth would a change of climate have, whereby the consumption of coal would be decreased? 6. If manna fell f

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Chapter 42. Distribution of the Social Income

1. What different ideas does the expression "distribution of wealth" suggest to you? 2. What different methods of obtaining an income have you noted among the men you know? 3. How can a yard of cloth be said to be distributed to the labor and capital producing it? 4. If two men of equal skill go fishing together, how would they find a rule for dividing the catch? 5. If one is more skilful or stronger, or owns the boat and the tackle, how would it affect the division? Would any rule be attainable

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Chapter 43. Survey of the Theory of Value

1. Mention any cases you can think of where merely changing the place of things added to their value; or changing their form; or where the mere lapse of time added to the value of the thing. 2. What effect on wages and interest does the bringing in of foreign capital have? 3. If, through greater efficiency of labor, wealth increases, which share benefits? 4. What would be the effect on wages, interest, and land rent of a sudden addition of rich land to the country? 5. What would be the effect on

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Chapter 44. Free Competition and State Action

1. What is economic freedom? How different from political freedom? 2. Does the presence of a policeman increase or diminish competition among men? 3. Are most positive laws intended to hinder competition or make it freer? 4. In what ways does competition reduce the total product? 5. Is custom a better regulator of economic action than competition? 6. Criticize the doctrine of economic harmony, giving examples....

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Chapter 45. Use, Coinage, and Value of Money

1. If gold were to become as plentiful as iron, would it be worth more or less than iron? 2. Some say Providence has indicated gold and silver as the materials for money. How has this been done? 3. Why does nearly all the gold produced in California leave the state? What keeps any of it there? 4. Who makes coins? Would jewelers make better ones? 5. When gold comes out of the mine is the gain to the community greater or less than when the same value of grain is harvested? 6. Does gold cost the da

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Chapter 46. Token Coinage and Government Paper Money

1. Define legal-tender as applied to money. What is meant by fiat money? 2. Show the difference between convertible and inconvertible money. 3. The government of the island of Guernsey having no money, issued paper-notes to pay for the building of a market. They circulated and were gradually taken up as the market earned its cost, during ten years. When they were all redeemed and burned, the island had the market free of cost. Explain how this could be done. (This is from Sumner's Problems in Po

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Chapter 47. The Standard of Deferred Payments

1. If every piece of money should miraculously be doubled in a night, whose interests would be affected? 2. Is the fact of one man's gain and another man's loss by chance of any economic or political importance? 3. What gives rise to the belief sometimes held that money is an invariable standard of value? 4. Is there anything in the nature of mining that keeps the ratio of the supply of gold and silver nearly uniform? 5. Is the value of gold and silver due to the action of government? 6. Does th

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Chapter 48. Banking and Credit

1. What does a bank do for a community? 2. What are the sources of income to a bank? 3. Can a bank that issues its own notes afford to lend cheaper than the ordinary capitalist? 4. What is discount and deposit? 5. Do all banks issue notes? Why? 6. What is the function of a clearing-house? 7. If there are twenty banks in a town and no clearing-house, how many collections would have to be made by all the banks daily assuming that each day depositors of each bank receive checks on the other ninetee

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Chapter 49. Taxation in its Relation to Value

1. Does taxation ever infringe on the right of private property? 2. What is it a citizen gets in return for his taxes? 3. Is there any relation between the taxes paid and the benefits secured from government? 4. A recent newspaper item says: "This is the year real estate is assessed. Turn the cow loose in the front yard, tear down the fence, make things look generally dilapidated, for it will be money in your pocket." What does this indicate regarding taxation? 5. The parts of an estate divided

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Chapter 50. The General Theory of International Trade

1. Is it bad policy to let the people of Palo Alto spend money in San Francisco for things that could be produced at home? 2. Pensions are defended as putting money in circulation. Is this like any tariff arguments you have heard? 3. Is it bad policy for California to buy New England manufactures? 4. If there were no legal bar to a tariff between the states, would a tariff probably be imposed? If so, would it be a wise measure? 5. A nation with n dollars in circulation has to pay a war indemnity

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Chapter 51. The Protective Tariff

1. If all trade is exchange do not the members of a trust reduce their income when they raise the price of their products by artificial agreement? 2. Is there any likeness between trade-unions and tariffs? Between tariffs and factory legislation? 3. Can it be of advantage to trade freely with one nation if general free trade is bad? 4. Who gained when Hawaiian sugar (before annexation) was admitted free of duty, while other sugar was taxed? 5. If it would pay us to admit goods free, may we be ju

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Chapter 52. Other Protective Social and Labor Legislation

1. Is granting patents an interference with trade similar to tariffs? 2. What reasons are given in justification of laws closing barbershops on Sundays? 3. Can a person owning a lot on a residence street of a city erect a glue-factory on it? 4. What have you noted as to the benefits or hardships of restricting child labor in factories? 5. Are men less able to bargain for the loan of money than for other things? 6. Can law fix the rate of interest at any point desired? If so, then why not at zero

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Chapter 53. Public Ownership of Industry

1. What are municipal franchises? Where are they? 2. What kinds of municipal industries have you seen in operation? How successful were they? 3. What are the main arguments for and against the city ownership and control of gas and waterworks? 4. What troubles arise from city politics? 5. Name the industries that are owned and controlled by towns and cities of which you have a personal knowledge. 6. Which of them are most satisfactory in your judgment? Which the least so? 7. What is the public se

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Chapter 54. Railroads and Industry

1. Why is transportation a greater problem in the United States than in Europe? 2. Show in what way natural waterways have determined the location of leading cities in America. 3. Give examples of cities whose growth has been caused by railroads. 4. What interests favor and what oppose the building of an isthmian canal? 5. Mention in order of economic importance four things that would happen if all American railroads were suddenly to be destroyed. 6. What cases have you seen where the railways i

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Chapter 55. The Public Nature of Railroads

1. What legal rights do the builders of a railroad have that are not enjoyed by all citizens? 2. Can you see any clear distinction between the public nature of a railroad and of a horse and carriage? 3. What harm can there be in the acceptance of passes by judges, legislators, and other public officials? 4. Ought the law prohibit the sale of tickets by "scalpers"? 5. Who has the greater political power, the president of the Pennsylvania Railroad, or the governor of that state?...

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Chapter 56. Public Policy as to Control of Industry

1. What effect would it have if the state should make laborers work for unsuccessful employers at lower wages than for successful ones? 2. Or should reduce rents for the less capable merchants and manufacturers? 3. Is there any rule for determining the limits of state interference? 4. Why does the question of the control of the railways in the interest of the public present especial difficulties in America?...

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Chapter 57. Future Trend of Values

1. Make a list of the things discussed in this course that tend toward improving the average condition of men. 2. Make a list of those that tend toward worse conditions for the mass of men. 3. State what kinds of material agents will probably increase in value relative to other kinds, giving reasons. 4. State what to your mind are three important economic problems whose answer is most uncertain, giving reasons. 5. If you had the power, what single public measure that you believe would be practic

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