Introduction to economics

Introduction

TO

ECONOMICS

BY

HENRY ROGERS SEAGER

Adjunct "Professor of 'Political Economy in Columbia University

NEW YORK

HENRY HOLT AND COMPANY 1904 s

*

No.

COPYRIGHT, 1904, BY

HENRY HOLT AND COMPANY

THE MERSHON COMPANY PRESS RAHWAY, N. J.

Preface

The presentation of economics to college classes is a task of no little difficulty. If lectures are depended upon exclusively, much time must be wasted in imparting information that could be acquired more quickly and more surely from the printed page. On the other hand, exclusive reliance on a text-book results in narrowness and dogmatism on the part of both teacher and student. A combination of the lecture and text-book methods offers a means .of escape from these difficulties, but to make this satisfactory, a text-book especially designed for the purpose must be used. Such a book should contain not only the information needed, but a systematic exposition of economic principles, intended to introduce rather than to exhaust each topic considered. It need not be elementary because the lectures which supplement it may be relied upon to clear up difficulties. On the other hand, it ought to give some account of the development of economic theories and of the views of the writers who have contributed most to this development.

In writing the following treatise, I have tried to keep these considerations constantly in mind. The principal feature which distinguishes it from other college text-books is its full treatment of the subject of distribution. This is the part of the study which is of greatest interest and importance ; yet it is the part most neglected in current manuals. Experience as a teacher leads me to think that the difficulty of making the laws of distribution intelligible is exaggerated. Even if it were not, I should still consider a serious effort to instruct a class in these laws a most valuable exercise in economics. In the following pages I have tried to explain the productivity theory of distribution and have made free use of the writings of my honoured colleague, Professor Clark, who has contributed so much to an understanding of the subject. The fact that I still cling to a modernised Ricardian theory of rent, despite his criticisms of lv Preface

that doctrine, and. that I employ a somewhat different method for measuring the productiveness of labour and capital does not lessen in the least my obligations to him. While making prominent the laws of competitive distribution, I have tried not to neglect the influence on actual distribution of monopoly and have devoted four chapters to different phases of the monopoly problem.

Another distinctive feature of the book is the introductory sketch of the rise and progress of modern industry in England and the United States. These chapters are designed to suggest the historical perspective so necessary to the judicial treatment of contemporary problems and, incidentally to present some of the industrial facts which must otherwise have been deferred to later portions of the book. To secure space for this innovation, I have been compelled to omit the discussion of government revenues and expenditures usually contained in manuals of economics. I have done this the more willingly because within the last few years as many as three excellent treatises on public finance have appeared as fruits of American scholarship.

The bibliographical note at the end of Chapter III. and the references for collateral reading appended to most of the chapters have been added for the guidance of general readers. Asterisks (*) have been used to distinguish the works that are especially recommended.

So many and various are the obligations to other writers of which I am conscious, that a detailed acknowledgment is out of the question. I cannot, however, refrain from recording my special debt to my former teacher and colleague, Professor Patten, of the University of Pennsylvania. To his wholesome distrust of accepted opinions, so ably communicated to his students, I owe more than I can express. I must also acknowledge my indebtedness to Professor Marshall's standard treatise and to the works of Finance Minister von Bohm- .Bawerk.

Among those who have read portions of my manuscript, Professor J. R Johnson of New York University has put me under special obligations by his criticisms. Any merit which may attach to the chapters on money and credit is largely due

Preface v

to him. My manuscript has also been improved by the suggestions and criticisms of my colleague, Dr. A. S. Johnson, and to him my thanks are due for that most trying service which friendship can command, the correction and revision of my proof. Greatest of all is my indebtedness to my wife, who has helped me at every stage of the work.

Columbia University, New York, December ij, igoj.

CHAPTER I The Rise of Modern Industry in England

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Economics Defined— Its Relation to other Sciences— Politics and Law— History— The Manorial System— Manorial and Modern Systems Contrasted— The Guild System— Merchant Guilds- Craft Guilds— Change from Local to National Regulation— The Black Death— Enclosures— The New System— Contributing Causes— The National System— Debasements of the Coinage— Statute of Apprentices— Monopolies— The Mercantile System— The Industrial Revolution— Mechanical Inventions — Spinning — Weaving — Steam Transportation — The Laissez-faire Policy — Abolition of Restrictions — Rise of Factory System— Effects of Factory System— Conclusion, . I

CHAPTER II The Industrial Expansion of the United States

Colonial Period— Liberty, Private Property, and Equality— Slave vs. Free Labour— The National Industrial Ideal— Physical Characteristics of the United States— The Atlantic Seaboard —The Middle West— The Far West— The New Possessions- Development of Transportation Facilities— Growth of Railroads —Crossing the Continent— Increase in Traffic— Growth of Population—The Foreign and Native Born— The Distribution of the Population— The Negroes— The Foreign-Born— Concentration of Population in Cities— Agricultural Development of the United States— Invention of Improved Implements- Recent Changes— Principal Agricultural Products of the United States— Corn— Hay— Wheat— Cotton— Development of Mining Industries— Iron and Coal— Gold— Silver— Copper— Petroleum— Mineral Products, iooo— Development of Manufacturing Industries— Manufactures of Iron and Steel- Manufactures of Cotton— Concentration in Manufacturing— The Development of Foreign Trade— Changes in Exports- Summary— Conclusion, 2° viii Contents

CHAPTER III Preliminary Survey of the Field of Economics PAGE

The Motives to Business Activity — Characteristics of the Economic Man — Self-interest — The Larger Self — Love of Independence — Business Ethics — Utility — Free Goods — Economic Goods — Value — Relation between Utility and Value — Value in Use and Value in Exchange — Price — Production and Consumption — The State of Normal Equilibrium — Effort and Sacrifice Involved in Production — The Cost of Production — Work and Pay — The World's Workers — Wages — Property and Its Earnings — The Methods of Economics — Deduction — Induction — Statistics — The Laws of Economics — Necessity of Recasting Economic Laws — Outline of Book — Conclusion — Bibliographical Note, .46

Chapter IV

Characteristics of Human Wants — Law of Diminishing Utility- Present vs. Future Goods — Wants Determined by Social Standards — The Law of Demand — The Law of Variety — The Law of Harmony — The Law of Least Social Cost — Adaptation of Consumption to the Environment — Adaptation to Tastes of Producers — Progress Due to Changes in Taste — Adaptation to Laws of Economical Production — Economical Consumption — Nutritive Value of Different Foods — Luxury — Necessaries for All before Luxuries for Any — The Point of View — Fallacies Respecting Luxury — Defensible Luxury — Saving vs. Spending — Statistics of Consumption — Consumption in the United States — Family Budgets — Two Aspects of Consumption — Conclusion, 63

Chapter V

The Valuations of a Crusoe — Value in Use Depends on Marginal Utility — Valuations Refer to Units of Commodity — Qualifications — Marginal Cost and Value — The Relation between Utility and Disutility — Surplus Utility — Marginal Utility and Value in Industrial Society — Different Goods Valued by Different Classes — Valuation even of Single Goods Complex — Valuation a Social Process — Marginal Cost and Value in Industrial So-

Contents ix

PAGE

ciety — Complications in Calculation of Social Cost — Valuation of Complementary Goods — Factors in Production Complementary Goods — Values in Use and Values in Exchange — Values in Exchange Expressed as Prices — Exchange Values Cannot Increase or Decrease — The Value of Money — Influences Affecting It — The Determination of Prices — Buyers' Calculations — Sellers' Calculations — Four Possible Cases — One Buyer and One Seller — Several Buyers and One Seller — One Buyer and Several Sellers — Two-sided Competition — An Illustration — The Actual Practice — The One-price System — Market Prices — Normal Prices — Summary — Conclusion, 81

CHAPTER VI Production : Land and Natural Forces

Production Defined — Manufacturing and Trading as Productive as Agriculture — Factors in Production : Nature and Man — Capital — The Productiveness of Land — Progress in Production — Different Characteristics of Different Pieces of Land — Old and New Countries Contrasted — Differences in Expenses of Production Due to Differences in Land — Farming — Manufacturing — Conclusion — The Law of Diminishing Returns — Statement of Law — The Extensive and Intensive Margins of Cultivation — Other Differences in Lands — An Illustration — Suburban and Country Plots of Land Contrasted — City and Country Plots of Land Contrasted — Conclusion — Summary — The Rent of Land, 107

CHAPTER VII Production : Labour and Capital

Labour as a Factor in Production — Qualities Influencing Productiveness of Labourer — Qualities are Either Inherited or Acquired — Health and Strength— Intelligence and Judgment— Ambition, Energy, and Perseverance — Imagination, Ingenuity, and Knowledge — Evolution and Production — Capitalistic Production — Advantages of Capitalistic Production — Capital Goods and Capital — Fixed and Circulating Capital Goods — Specialised and Free Capital Goods — Fixed Capital Increasing— Capital Subject to Law of Diminishing Returns — Also Labour — Methods of Accumulating Capital — Saving and Investing — Borrowing and Investing — Borrowing Not Always for Investment — Capital Goods, Not Money, Saved — Buying Stocks and Bonds Does Not Add to Capital— Kinds of Capital Goods — Land and Capital—Acquired Skill Is Not Capital— Dealers' Stocks Are x Contents

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Capital — Money — Progress in Capitalistic Production: The Middle Ages — The Growth of Commerce — Influence of the Industrial Revolution — Summary — Conclusion, . . . 120

CHAPTER VIII Production: Co-operation and Business Organisation

Co-operation in Labour — Varieties of Co-operation — Dependence of Co-operation on Development of Markets — The Influence of Improved Transportation Facilities — Qualities Necessary to Effective Co-operation — Such Qualities Developed by Co-operation Itself — The Advantages of Co-operation — The Disadvantages of Co-operation — Other Considerations — Methods of Gauging the Advantages of Co-operation — Statistics of Pin-making in 1776 and To-day — Progress Greatest in Manufacturing — Business Organisation — The Entrepreneur — Qualities of a Good Entrepreneur — The Single Entrepreneur System — The Partnership — The Corporation — Advantages of the Corporation — Its Disadvantages : Diffused Responsibility — Misuse of Borrowing Power — Disregard of Public Interest — Practical Aspects of Corporation Problem — Large vs. Small Scale Production — Advantages of Large Scale Production — Division of Labour — Expensive Machinery — Advantages in Transporting Industries — Economy in Buying Supplies — Economy in Connection with By-products — Can Spend More on Experiments — Business Enterprises Classified — The Representative Firm — Summary — Relation between Production and Distribution, 137

CHAPTER IX Production and Distribution

The Different Branches of Production — Graphic Representation of Relation of Different Branches — The Real Incomes of All Classes Are Paid out of Capital — Items in the Expenses of Production — Materials — Insurance Premiums — Interest — Wages — Rent — Taxes — Summary — Differences in Expenses of Production — The Normal Expenses of Production — Active Competition Assumed — Normal Prices Just Cover Normal Expenses of Production — Reasons for Deviation of Market from Normal Prices — The Relation between Production and Distribution — The Problem of Distribution — The Money Income — The Real Income — State of Normal Equilibrium — Graphic Illustration —

Contents xi

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The Relation between Production and Distribution in the State of Normal Equilibrium — Helpfulness of the Assumption of a State of Normal Equilibrium, 155

Chapter X

The Wages of Management — The Wages of Management Set a Minimum below Which Profits Will Not for Any Length of Time Fall — The Wages of Management May Be a Very Large Sum — Conditions Fixed for the Entrepreneur — The Power of Substitution — The Source of Profits Above the Wages of Management — Price Fluctuations a Source of Profits — Explanation — Efforts to Control Prices — The Consequences of the Failure of Such Efforts — Dealings in " Futures " — Dealings in " Futures " Illustrated by Reference to Wheat — The Economic Function of Speculation — Speculation vs. Gambling — Conclusions — The Influence on Profits of Rising Prices — Of Falling Prices — Alternations between Prosperity and Depression in the United States — The Influence of Discoveries and Inventions on Profits — Increased Profits of Some Entrepreneurs Offset by Diminished Profits of Others — The Influence of Improvements in Methods of Production on Profits — The Process by which Profits are Eliminated — Change a Cause of Profits — Profits and Losses the Normal Consequences of Progress — The Influence of the Variableness of Climate on Profits — Progress Diminishes Man's Dependence upon Nature — Insurance as a Means of Escaping Consequences of Changing Natural Conditions — Profits and Losses Tend to Balance Each Other — Profits and Rent — Profits in a New Country Usually in Excess of Losses — Practical Problem Connected with Profits Due to Exploitation of Virgin Natural Resources — The Influence of Changes in the Other Shares on Profits — The Effect of Changes in Wages — Summary — Conclusion, . . 169

Chapter XI

The Nature of Monopoly — Distinction between Monopoly and Differential Advantage — Buyers' Monopolies — The Kinds of Monopoly — The Importance of Different Kinds of Monopoly in the United States — Monopoly vs. Competitive Industry — Limitations on the Power of Monopolies — The Power of Substitution — Sugar an Example — Substitution in Connection with a Railroad — Potential Competition as a Check on Monopoly — The Case of the Single Village Store— Competition in Connection xii Contents

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with Railroads — The Fear of Governmental Interference a Check on Monopoly — Conclusion in Reference to Efficacy of Checks — The Law of Monopoly Price — A Patented Brand of Soap as an Example — Another Case — Law of Monopoly Price Indicates the Limit of Price Rather than the Actual Price — Complications in Connection with Monopoly Prices — Practice of Asking Different Prices for the Same Goods Not Unusual — Final Statement of Law of Monopoly Price — Reasons for Concealing Monopoly Profits — Methods of Concealing Monopoly Profits — The Overcapitalisation of Monopolistic Corporations — Stock Watering — Difficulty of Measuring Monopoly Profits — Funded Income Defined — The Role of the " Innocent Investor " in Connection with Monopolies — Monopoly is Not Necessarily Antagonistic to Public Interest — Desirable Monopolies Should Be Regulated — Monopoly Profits Not Always Large — The Influence of Monopoly Profits on the Other Shares in Distribution — Practical Phases of Monopoly Problem Treated in Later Chapters, 188

Chapter XII

Contrast between Profits and Other Shares in Distribution— The Nature of Rent — Problems Connected with Rent — The Source of Rent — The Principal Grades of Land Distinguished — Store Sites — Residence Sites — Plots Devoted to Truck-Farming — Farm Land — Grazing Land — Fertility as Important as Situation in Determining Rent — The Demand for Land of Different Grades — yRent Includes Usually a Marginal as well as a Differential Element — The Calculation of Rent — Summary of Explanation of Rent — Graphic Representation of the Theory of Rent — The Rent of Land of Grade D — The Total Rent— Other Causes of Rent — The Rent of Sources of Water Power— The Rent of Mines — Apparent Exceptions to the Law of Rent — The No-rent Margin Found in Connection with Various Uses of Land— The Rotation of Crops Complicates, but Does Not Contradict the Law of Rent— The Average Return the Basis for Calculating Rent— Land Fit Only for One Use May Command High Rent— Other Exceptions— Obstacles to the Exact Calculation of Rent — Investments of Capital in Land and Rent — The Capitalisation of Rent — Rent a Funded Income — Summary of the Theory of Rent— Includes Usually a Marginal as well as a Differential Element— But May Be Calculated as a Differential from the Intensive No-rent Margin— A Surplus Income— Does Not Arise Where Best Land is Superabundant —Its Relation to Law of Diminishing Returns— Return from

Contents xiii

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Permanent Improvements Subject to Law of Rent — Price of Land — Rent Capitalised at Current Rate of Interest — Actual Rent Differs from Economic Rent — The Metayer System — The Rent of Buildings Distinct from Ground Rent — Importance of Rent in United States — Rent as a Source of Income in Great Britain, 205

Chapter XIII

Wages Defined — The Wages Question — Differences in Rates of Wages Due to Varying Capacities of Working Population — Differences Determined in Same Way as Rents — The Relation between Members of Different Groups — Tendency towards Uniformity of Wages in Each Grade — The Different Grades into which Workmen Are Divided Overlap — Workmen below the Margin of Their Group — In Practice the Number of Grades of Workmen is Very Large — The Causal Relation between Marginal and Higher Wages — The Rate of Wages Depends on Demand and Supply for Workmen of Each Given Grade — Differences in Wages Perpetuated by the Immobility of Labour — Efficiency and Time Wages Contrasted — Other Causes of Differences in Wages — Differences in the Cost of Living — Differences in Cost of Mastering Different Trades — Differences in Agreeableness of Different Occupations — Allowance for Dangers Incurred — Allowance for Chance of Success — Social Esteem a Factor — Also Regularity of Employment — Finally Chances of Promotion Considered — Competition Would Make Advantages of Different Employments Equal if Men were Exactly Alike, but They are Not — The Influence of Heredity Indeterminate — The Influence of Habit, Custom, and Education — Differences in Standards of Living Perpetuate Differences in Wages — Educational Opportunities Enjoyed by Children in First Grade — Children of the Middle Class — Their Choice of Occupations — Standards of Living Not Rigid — Children in the Third Grade — The Fourth Grade — The Fifth Grade — Non-competing Groups — Reasons for Failure to Invest More Capital in Education — Conclusion — The Determination of Marginal Wages, 222

Chapter XIV

Interest Defined — Interest, Rent, and Wages — Differences in Rates of Interest — The Mobility of Capital Depends upon the Replacement Fund — Differences in Rates of Interest Eliminated xiv Contents

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by Competition— Differences in the Same Branch of Production — Differences in Different Branches of Production — Causes of Differences in Rates — Monopoly — Interest on Permanent Improvements — Specialised Forms of Capital Have Little Mobility over Short Periods — And Are Consequently Liable to Depreciate — Differences in Risk of Loss — Differences in Social Esteem — Differences in Rates between Different Sections — Interest on Money — Reasons for the Payment of Interest for the Use of Money — Money or Purchasing Power the Form first Assumed by the Replacement Fund — Interest on Money — Loans Made Uniform in Each Money Market — Differences in Risk Cause Differences in Rates of Interest — Differences in Rates of Interest Less Extreme than Differences in Wages — How Marginal Wages and Marginal Interest are Determined — Marginal Rates May be Studied at the Margin of Cultivation — Entire Return at the Margin Constitutes Wages and Interest — The Circumstances Determining the Amount of the Joint Share — The Influence of Entrepreneurs — Qualities and Quantities "of Workmen and Capital Goods Important — Both Wages and Interest High in the United States — Workmen and Capital Goods Compete as well as Co-operate — This Competition Leads to Comparisons and Substitutions by which Wage and Interest Rates are Determined — The Law of Distribution for a Society in the State of Normal Equilibrium — The Same Law Applies Roughly to Actual Industrial Society — The Law of Distribution Illustrated — An Increase of Capital Increases the Marginal Productiveness of Labour — The Mutual Interdependence of Shares in Distribution, . 244

Chapter XV

Summary of Theory of Value— Exchange Value and Price— The Law of Price — Relation between Incomes of Consumers and the Expenses of Production — The Influence of Monopoly upon the Shares of Income Secured in Competitive Industries — Graphic Representation of Production and Distribution — Restatement of the Law of Rent— Restatement of the Law of Wages— The Wages of Marginal Workmen— The Law of Interest — The Calculation of the Replacement Fund — The Life Period of a Capital Good Depends upon Rates 'of Wages and Interest — The Law of Interest Applies to Gross Earnings of Capital Goods — Restatement of the Law of Competitive Distribution — The Same Law Generalised — True

Contents xv

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Relation between Expense of Production and Value — The Determination of Shares in Distribution a Complex Form of Valuation — The Productivity Theory of Distribution — The Exchange Theory of Distribution — Interest a Discfount on Future Goods — The Exchange Theory True from Viewpoint of Lenders — The Sense in which Capital Goods are Productive — Exchange and Productivity Theories Complementary, Not Contradictory — The Wages-fund Theory — Conclusions Drawn from the Wages-fund Theory — Criticism of the Theory — Other Objections, and Conclusion, 265

CHAPTER XVI Value, Price, and Distribution (Concluded)

Ultimate Determinants of Distribution — Statistics of Population — Significance of These Statistics — Birth, Death, and Marriage Rates of Principal Countries — Comment on the Table — The Malthusian Doctrine of Population — Influence of the Doctrine on Economic Thought — Criticism of the Doctrine — Premisses in Reasoning about Population — The Physiological Check — The Influence of Social Customs — The Economic Check — The Influence of the Standard of Living — A Stationary Population — Conditions Necessary to a Low Birth-rate — Causal Relation between the Standard 1 of Living and Wages in the United States — Population Should Grow at the Top, Not the Bottom — The Influence of Immigration and Emigration — The Growth of Population Controlled by Standards of Living — The Growth of Capital — The Growth of Wealth in the United Kingdom — In the United States — Growth of Agricultural and Manufacturing Capital — Necessary Cautions — Present Preferred above Future Goods — Reasons for this Preference — The Motives to Saving — Progress Strengthens These Motives — The Ultimate Determinants of Distribution — The Balancing of Utilities against Disutilities, . . 283

CHAPTER XVII Money and the Monetary System of the United States

The Disadvantages of Barter — The Nature and Functions of Money — Money a Standard of Value — Also of Deferred Payments — Prices and the Value of Money Vary Inversely — Stability of Value a Desirable Attribute of Money — Various Commodities Used as Money in the Past — Qualities Needed in a xvi Contents

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Good Money— The Role which the State Plays in Connection with Money — Coinage and the Printing of Paper Money — Standard, Token, and Credit Money — Gresham's Law — An Illustration — Gresham's Law and the Present Monetary System of the United States — The Adoption of the Gold Standard in Europe — Its Adoption Outside of Europe — Monetary History of the United States — The Gold Standard Law — Present Monetary System of the United States — Gold Coin Kept at a Constant Parity in Value with Gold in Coin — How the Parity between Gold and Silver Coin Is Maintained — History of United States Notes — The Gold Reserve — National Bank Notes — Stability of the Gold Standard — The Limping Standard — The Silver Hoard — Objections to Sale of Silver Dollars — The Function of Token Money — Token Money of the United States — The Function of Credit Money — Objections to Credit Money — Credit Money of the United States — Conclusion, 302

Chapter XVIII

The Nature of Credit — Book Credit — The Banking Business 1 — Based on Confidence — The Check System — Checks and Drafts — Money and Credit — Importance of Deposits to Banks — Forms of Bank Loans — Call and Time Loans — Banks Lend Their Credit by Means of Deposit Accounts — Or Bank Notes — Interest on Bank Loans — Paid for Control over Capital — Gold Coin is Capital — Credit is Not Capital, but it does the Work of Standard Money — Limitations on the Use of Bank Credit — Interest on Call Loans Usually Low — Short-time Loans — Competition Adjusts Bank Rate of Interest to General Rate — Ought Banking to be Regulated? — Reasons for Favouring Regulation — History of the National Banking System — The Present Law — Protection for Depositors — Faults in System — United States Bank Notes are Perversely Elastic — Freer Note Issue Necessary — Defect in Reserve Requirements- State Banks — Savings Banks — Trust Companies — Conclusion, 323

Chapter XIX

Unsettled Problems — The Value of Gold and Prices — Demand for Gold in Arts — Monetary Demand — Not Unlimited — Money and Credit — Recent Fluctuations in Monetary Demand — The Re-

Contents xvii

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serve Demand — Conclusion in Reference to Demand — The Supply of Gold — Probable Future of Gold Supply — Measuring the Value of Money by Method of Index Numbers — Defects in the Method — Relation between Value of Money and Level of Prices — Price Statistics — Reasons for Fluctuations in Prices — The General Trend of Prices — Statistics Not Exact — International Bimetallism — The Time for it Probably Passed — The Silver Question in the United States — The Probable Consequences of the Free Coinage of Silver — The Future of the Gold Standard — The Multiple Standard, .... 345

CHAPTER XX Foreign Exchange and the Tariff Question

The Nature of Foreign Exchange — Anglo-American Trade — Sterling Exchange — The Gold Points — The Rate of Sterling Exchange — The Rate of Interest and Foreign Exchange — Prices of Stocks and Foreign Exchange — Prices of Commodities and Foreign Exchange — Ways of Quoting Foreign Exchange — Three-cornered Exchanges — Exchanges between Gold and Silver Standard Countries — A Country's Gold Supply Regulates Itself— The United States Should Normally Export Gold — Foreign and Domestic Trade Compared — Peculiarities of Foreign Trade — Principle ControlIingForeign Trade — The Policy of Protection — The Advantages of Free Trade — History of Protection in the United States — The Home-market Argument — The Infant-industry Argument — Argument of List — Protection in the United States Since the Civil War — The Wages Argument — Political Ideal of Protectionists — The Tariff of 1897 — The Burden of Protection — Complexity of the Tariff Question — Present Status of the Tariff Question in the United States — The Strength of Protection — Opposition to Protection to Trusts — Folly of Protecting Exploitation of Limited Natural Resources — The Burden of Protection to Producers for Export — Retaliatory Tariffs — The Future — Free Trade — The Present Trade Policy of the United Kingdom — ■ The Free-trade Movement, i860- 1870 — The Protectionist Reaction — The Present Outlook Abroad, 361

Chapter XXI

Obstacles to Free Competition in the Labour Market — The Disadvantages of Wage-earners as Bargainers — Competition by Employers an Active Force — Nature of the Labour Movement —Objects of Labour Unions — The Membership of American xviii Contents

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Unions — Of British Unions — Importance of Legal Questions — The Development of Trade-union Law in the United Kingdom — Growth of Unions — English Law of Conspiracy — Labour Unions Liable for Damages — The Law in Reference to Labour Unions in the United States — The Influence of English Precedents — The Benefit Features of Labour Unions — Collective Bargaining — Employers' Objections to Collective Bargaining — Conclusion — Strikes and Lockouts — Use of the Boycott in the Coal Strike — Difficulty of Enforcing Law during Strikes — Plans for Avoiding Strikes — Trade Agreements — State Board of Conciliation and Arbitration — Reasons for Government Interference — Compulsory Arbitration — New Zealand's System — The System of New South Wales — Use of the Injunction in Connection with Strikes — Legal Justification — Extension of Scope of Injunctions — Reasons for Opposing Resort to Injunctions — The Influence of Labour Unions on Wages — The Case of Open Unions — Labour Unions Sometimes Monopolies — State and Federal Laws Helpful to Unions — Monopolistic Unions to be Condemned Like Other Monopolies — Educational Work of Labour Unions — Schools of Citizenship — Active in Securing Needed Labour Laws — The Future of the Labour Movement, „ 385

CHAPTER XXII The Legal Regulation of Labour

Reasons for the Legal Regulation of Labour — Employees Do Not Always Bargain on Equal Terms with Employers: Children — Women — Men — Dangerous Trades — Object of Protective Laws — History of Labour Legislationin Great Britain — 1802-1831 — Act of 1833— Mining Act of 1842— The Present Law— Constitutionality of Labour Laws in the United States — Conflicting Decisions of American Courts — Decision in Utah Eight-hour Law Case — Value of this Precedent — Child-labour Laws in the United States — Purpose of Such Laws — Laws Regulating Labour of Women — The Agitation for a Universal Legal Eight-hour Day — Objections to Plan — Restrictions of Labour of Men Defensible — The Sweating Evil — Conditions in the Clothing Trades — Remedies Tried in Great Britain and the United States — Australasian Experiments — Conclusion — The Regulation of Dangerous Trades — System in Great Britain — Employers' Liability in the United States — The Workmen's Compensation Act of Great Britain — Continental Systems — Backwardness "of the United States in This Field — Arguments for and against the Legal Regulation of Labour — Need of Uniformity in the United States — The Future, . . . 412