Elementary Principles of Economics

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ELEMENTARY PRINCIPLES OF ECONOMICS -.3 0 THE MACMILLAN COMPANY NEW YORK . BOSTON - CHICAGO DALLAS ATLANTA' SAN FRANCISCO & CO., LIMITED LONDON' BOMBAY' CALCUTTA MELBOURNE THE CO. OF CA!(ADA. LTD. ELEl\fENTARY PRINCIPLES OF ECONOl\IICS TOGETHER WITH A SHORT SKETCH OF ECONOMIC HISTORY BY RICHARD T. ELY AKD THE LATE GEORGE RAY WICKER THIRD EDITION REnSED BY RICHARD T. ELY, PIl.D., LL.D. DIRROTOR OF THE IXSTITUTE FOR RFSEARCH IN LAND ECONOMICS A:'OO .PUBLIC l;TILtTIE8, ANI) PROFES .... Olt OF ECONOMICS 1:'1 TilE UKI'ERSIT'l' OF WISCONSI:s' IN COLLABORATION WIT II SAMUEL J. BRANDENBURG, PH.D. OF ECONOMICS I){ CLARK C!inERSlTY Nr\n THE MACMILLAN COMPANY 1924 .All rightlJ reserTie:l PRINTED IN THE UNITED STATES OF AMERICA COPYRIGH"r, I H ~ ; ~ , By THE MACMILLAN CO:\IPANY. Set up and electrotyped. Published August, 1943. Reprinted April, 1924. 'XarroOD!I t;}rnHJ J. S. Cu? 2. On what basis wouJ.i you argue against slavery in the Cnitecl St.ates to-day? 3. A corporation exists only by virtue of a charter granted by society. Has a corporation a natural right to hold property; to make contracts? FUNDAMENTAL 21 4. Dors t.he line between public property and private property change according to any general principle or law? 5. Discuss the bearing of the Federal prohibition amendment on the limitations set by the state on private property. 6. Give some illustrations to show that private property is impor-tant to (1) thrift; (2) inventiveness; (3) capitalistic production; (4) home and children. 7. Look up several definitions of "socicty." "-hich onc do you think is best? Why? LITERATURE Ely, R. T.: Property and Contracl, especially Bk. I, Pt. I, Chs. I-III. Hamilton, W. H.: C"rrenl Economic Problems, Revised edition, 320, 326, 328, 338, 341, 342. l\larshall, L. C.: Rcudin9s in Industrial Society, Ch. XIV, A, C. Mill, John Stuart: Principles of Political Economy, Bk. II, Ch. I, 2, and Ch. II, 1, 5,6, and 7. Report of the United Stat.es Commissioner of Patents for 18S8. (See also others of the Pat.ent Commissioners' Annual Reports.) Ritchie. D. J.: Nattoral Rights. Ross, E. A.: Principles of Sociology, Ch. IX. BOOK II A BRIEF SKETCH OF ECONOMIC HISTORY CHAPTER IV INTRODUCTORY What Economic History Is. - In beginning the study of economic it will be well for us to recall what has beell said in a preceding chapter as to the nature of the subject which is before us. The history of literature, the history of government, the history of religion, and other histories which the student can readily call to mind, have one thing in common: they are all of them histories of man. Each of them treats of man in one particular phase of his activities. It is the same '.':itll economic history. Its subject is man, but it deals primarily, not with his government or his wor-ship, but with his efforts to get a living. Many who have held a narrow view of our subject have objected sneeringly that it is but a "bread and butter" science. Even if this were a just view of the subject, economics would still be worthy of our most careful study. But, as a matter of fact, it means much more than bread and butter. It is plain on a moment's reflection that every kind of activity, however sublime, depends to some extent upon material things. And so this subject of ours - man in his effort to acquire and to usc material thine-s, to satisfv his wants to "et a livinG"-'-' " 'b l:t is of interest to everybody, awl is closely connected with every kind of human effort. 22 INTRODUCTORY 23 General Survey. - At the beginning of our review of the historv of man's economic efforts we are struck bv the . . fact that all the manifold ways of getting things may after all be reduced to two: man must either find or make. Of course the two ways often combine in varying proportions, and in our own experience the two are constantly shading into each other; but for purposes of present clearness we well make the distinction. Now, uncivilized man finds the things he uses; civilized man adds to finding the art of making. Indeed, civilization, on its material side, consists largely in wanting many things and in learning how to make and to use them. The economic activity of man before the dawn of recorded history is enshrouded in so much of that we can do little more than conjecture regarding it. lYe have evidence to show that prehistoric man obtained his material goods, as the beasts do, simply by taking possession of natural products, exercising little or no control over nature, and that he protected himself from the elements only by using cans or by the simplest of contri,"anees. Historical Stages. -" The period of civilization just men-tioned is something so remote, something about which our knowledge is so uncertain and fragmentary, that we are scarcely able to treat it as a separate stage in economic evolu-tion at all. We may, therefore, pass directly to a study of the regular stages, as they have commonly been described and distinguished, beginning with the time when men had learned to lcindle fires, to eat meat, and to lit-ein some kind of political communities, however imperfect. Starting thus, we conveniently divide the course of man's economic de yelopment - regarding it from the point of view of his means of procuring goods - into five stages, as follows: -(1) The hunting and fishing stage, (2) The pastoral or nomadic stage, 24 ELEjVIENTARY PRINCIPLES OF ECONOMICS (1) The agricultural stage, (J) The handicraft or trades and commerce stage, (S) The industrial stage. From the point of vicw of the changing size of the domi-nating' economic unit, man's history falls into these four stages: -(1) The stage of independent economy, The stage of town or local economy, (3) The stage of national economy, (4) The stage of international or even world economy. Again, looking at the same development from the point of view of man's ways of exchanging goods, we may sImI-larly distinguish the four following stages: -(1) The stage of mutual giving of gifts, (2) The stage of " truck" or barter economy, 0) The stage of money economy, (4) The stage of credit economy. Still again, if we view economic evolution from the point of view of labor, we have the six following stages: -(1) Slaughter of enemies taken in (2) Slavery, (3) Serfdom, (4) " Free" labor, governed largely by custom in the mak-ing of contracts, (5) " Free" labor, with individual contract, (6) "Free" labor, with collective bargaining and group contract regulatcd increasingly by statute. These classifications may now be brought together in a single table, in which the historical relation of the various classifications is roughly indicated by the position of the stages in the parallel columns. INTRODUCTORY 25 E C O N O ~ I I C STAGES From the Point of From the Point' of From the From the Point of View of Produc- View of the De-- Point of View of Labor. tion. velopment of the View of Economic Unit. Exchange. 1. Hunting and l. Independent l. Mutual f1. Slaughter of fiohing economy gifts enemIes in l war 2. Burter or r "truck" I 2. Pastoral or 12. Slavery nomadic l 3. Agricultural r 3. 2. Town or Money f3. Serfdom local economy 1 , l 4. Handicraft r 4. "Free" labor, or trades and 1 customary commerce l contract 3. :'< ational r-" Free" labor, economy individual contract 5. Industrial 4. Credit r 4. International or r "Free" labor, world economy group con-tract It must not be understood that these stages in any of the classifications are distinctly or sharply separated, or that we can fix definite dates at which men consciously abandoned one way of obtaining goods, or of exchanging them, and passed to another method. The transition from one stage to another is slow and almost imperceptible. Those students of this book who ha,"c studied botany or zoology will under-stand the illustration when we say that the stages shade into one another as do the varieties of closely related genera in the case of living organisms. Moreover, it must not be un-derstood that all of the features of an earlier stage pass away when men entcr into the newer way. In many cases the features of the old survive and even have an increased 26 ELEMENTARY PRINCIPLES OF ECONOMICS importance in the later stage. Thus trades and commercc are to-day pursued on a far larger scale than they were in the handicraft stage; but since then new and important features of economic life have developed to give a new char-actcr to the age, and we seek to indicate this change by some distinctive title. To-day, in thc t: nited States, we can find illustrations of nearly all the stages of evolution that have been mentioned. Barter, or truck, is still the commonest mode of exchange in some parts of the country, and, indeed, there are com-]J:ation of by-prod-ucts, in adapting the form of business organi:>:ation to the