Outlines of economics; a syllabus for introductory study

Front matter

nD

Class. i\^ n

Book lOpyi'igfrtN

Chapter I. Introductory

I. Definition, Scope and Scientific Character of Economics.

a. Definitions used at different periods of economic study reveal the change in its character.

Adam Smith, 1776: Inquiry into the Nature and Causes of the Wealth of Nations.

Nassau Wm. Senior, 1836: " The science which treats of the nature, the production and the distribution of wealth. "

John Stuart Mill, 1848 : " Writers on Political Economy profess to teach, or to investigate, the nature of Wealth, and the laws of its production and distribution."

Wilhelm Roscher, 1854 : "The starting point as well as the object point of our science is Man,"-

Luigi Cossa, 1877 : "The science of the social ordering of wealth."

J. N. Keynes, 1890: "The science which treats of the phenomena arising out of the economic activities of mankind in society." "Economic activity may be defined as human activity which directs itself towards the production and appropriation of such means of satisfying human needs as are capable of being made the subject of exchange."

R. T. Ely, 1908: "The science which treats ot those social phenomena that are due to the wealth-giving and wealth-using activities of man."

6 Introductory.

b. "'Money,' or ' general purchasing power' or 'command over wealth' is the center around which economic science clusters ; this is so, not because money or material wealth is regarded as the main aim of human effort, nor even as affording the main subject matter for the economist, but because in this world of ours it is the one convenient means of measuring human motive on a large scale."

c. Not all subjects of study are sciences. The characteristics of the sciences are ability to classify facts or phenomena in orderly arrangement ; and to establish relations of sequence or cause among them. From these follow some possibility of prediction. Sciences have these characteristics in very different degrees.

In spite of the apparent freedom of the individual will, human actions are capable of scientific study, and, when masses are considered, of comparatively accurate prediction. The social sciences are incomplete and in many respects very inexact ; but, because it possesses a more accurate measure of the relative strength of human motives, Economics is more exact than the others.

Economics aims to discover truth and must be distinguished as a science from statesmanship, philanthropy, social reform, which, as arts, endeavor, on the basis of the truth discovered by Economics and other sciences, to accomplish results.

Required reading. Johnson, Introduction, pp. 7-12 ; Seligman, Principles, §§3 and 14 ; and Marshall, Economics of Industry, Bk. I., chs. i and 3.

Suggested reading. Marshall, Principles, (5th ed.), Bk. I., chs. 2, 3, passim; Gide, Principles of Political Economy , 2d ed., pp. 1-7; Cossa, Introduction, pp. 40-65 ; Davenport, Outlines of Economic Theory^ pp. 1-7 ; Fetter, Principles of Economics^ ch. 1 ; Keynes, Scope and Method, chs. 1-3 ; Cairnes, Political Economy ; its Character and Logical Method, pp. 25-42.

Introductory. 7

2. Economic Law and Method.

Economic laws are statements " that certain action may be expected under certain conditions from the members of a social group " in lines " of conduct in which the strength of the motives chiefly concerned can be measured by a money price. ' '

In Economics as in other sciences the adjective normal is used to describe that which is in accord with scientific law.

Like most other sciences Economics uses both induction and deduction in discovering its laws.

Required reading. Marshall, Economics of Industry, Bk. I., ch. 4 and Appendix A; Seligman, Principles, '^'^ 10, 11; Seager, Introduction to Eco- 7iomics, §§ 31, 32 or Principles, §§ 35, 36.

Suggested reading. Marshall, Principles, (5th ed.), Bk. I., cli. 3 ; Cossa, Introduction, pp. 67-92 ; Gide, Principles, Bk. I., ch. 4 ; Keynes, Scope and Method, chs. 6, 7 ; Nicholson, Principles of Political Economy, Vol. I., pp. 18-20 ; Hadley, Economics, pp. 23-25 ; Q:a.irn&s, Political Economy ; Its Character and Logical Method, Ivecture III.

3. Relation of Economics to other Subjects of Study.

Economics and the other social sciences are closely related and mutually dependent. Even when we endeavor to decide the appropriate course of social action in lines in which the motives are mainly economic and in which accordingly economic laws will be our chief guide, we get assistance from History, Psychology, Sociology, Law, Politics, Statistics, Finance and other studies which deal with man individually or socially. But Economics having its own special field of investigation should be discriminated from all these other subjects.

Required reading. Seligman, Principles, §§ 12, 13; Seager, Ijitroduction, § 2, ox Principles, § 2.

8 Introductory.

Suggested reading. Cossa, Introduction, pp. 23-39 ; Keynes, Scope and Method, chs. 4, 9, 10; Ely, Outlines, (1908) pp. 11-14; Marshall, Principles, (5th ed.) Appendix C. ; Vette:r, Principles, ch. 1, § 2; Dictionaries and Encyclopsedias for definition and scope of the various social sciences.

4. Smportance of the Economic Factor in Social Development. " Economic Interpretation of History."

It is asserted by some that since "the existence of man depends upon his ability to sustain himself, the economic life is therefore the fundamental condition of all life. " Marx says : " The economic structure of society is the real basis on which the juridical and political superstructure is raised and to which definite forms of social thought correspond ; in short, the mode of production determines the character of the social, political and intellectual life generally." This "economic interpretation of history does not exhaust the possibilities of life and progress ; it does not explain all the niceties of human development ; but it emphasizes the forces which have hitherto been so largely instrumental in the rise and fall, in the prosperity and decadence, in the glory and failure, in the weal and woe of nations and peoples. It is a relative rather than an absolute explanation. ' ' — Seligman.

Suggested reading. Seligman, Economic Interpretation of History; Ghent, Mass and Class, ch. 1 ; Marshall, Principles, pp. 1-4 ; Marshall, Economics of Industry, pp. 1-4 ; Spargo, Socialism, ch. 4.

5. Value of the Study of Economics.

The study of Economics gives better understanding of history, deeper insight into our present social organization, guiding principles in connection with nearly all social activities, deeper sympathy and interest in connection with some profound social and ethical problems, intelligence and discretion with which to temper our feelings in the presence of social evils. It also provides a mental discipline surpassed

Introductory. 9

by few if any studies, since it encourages precision, accuracy, discrimination, clearness of thought and expression. Many of its problems are of such difficulty that they require most intense application. A continued chain of reasoning is frequently necessary as in a mathematical demonstration ; but since the forces and factors that must be borne in mind are very numerous, comprehension and grasp in an unusual degree are necessary. It gives a training in that kind of thinking which is necessary for success in every day life and action.

Suggested reading. Andrews, Institutes of Economics, % 16 ; Laughlin, Stndy of Political Economy, chs. 2, 3 ; Cossa, Introduction, pp. 93-110 ; Patten, American Economic Association Publications, 5: 473-486. Marshall, Principles, (5th ed.) Bk. I., ch. IV., §§5, 6; Marshall, Plea for the Creation of aCurriculum in Economics.

Chapter II. Nature And Development Of Economic Society

I . Organic Nature of Study.

A society is not an accidental aggregation of unrelated individuals but is organic in character. It has the power of growth from within ; it manifests "differentiation" or spec_ ialization of function, and "integration" or that close interdependence and inter-relation of parts which creates an essential unity. Social evolution is in accord with the general evolutionary tendency from the homogeneous, or generalized, to the heterogeneous, or specialized. An efficient cause of progress has been that " struggle for existence " which results in the "natural selection" of those methods, institutions, structures, groups, "which are best fitted to derive benefit from their environment." Social evolution is not merely biological but largely physical and increasingly self-directed. Whether this evolution results in progress or degeneracy depends upon whether or not it helps create a social environment favorable to that higher personality which is the goal of human existence. In the field of economic structure and activity the highly organic nature of modern society is preeminently apparent.

Required reading. Marshall, Economics of Industry, Bk. IV., ch. 8.

Suggested reading. Marshall. Principles, Bk. IV., ch. 8 ; Fairbanks, Introduction to Sociology, pp. 31-44 ; Small and Vincent Introduction to the Study of Society, pp. 87-96 ; Ritchie, Principles of State Interference , pp. 3-51 ; Darwinism and Politics, pp. 1-83; McKechnie, The State and the Individual, pp. 1-26..

2. Characteristics of Modern Industrial Society.

Prominent in modern industry are separation of occupations ; division of labor ; machine process ; great diversity in required industrial skill ; opportunity for extensive wage employment of unskilled laborers including women and children ; large industrial units ; trusts ; local specialization of industries ; rapidity and cheapness of communication and transportation ; wide markets ; separation of industrial functions ; the wages system ; enormous employment of capital ; profit as the test of success ; money ; the credit system with its elaborate machinery; possibility of economic maladjustment ; crises and depressions. Economic freedom, competition and recognition of the private property right are general characteristics of modern society that exert profound influence on all its economic and social relations and give rise to many of the more special characteristics mentioned above.

These characteristics are not the result of conscious action or catastrophy, but of a long process of evolution.

3. Evolution of Private Property.

From communal ownership is developed individual ownership of weapons, animals, slaves, chattels, land. The origin of individual ownership is often force and fraud ; but the development and persistence of the system of private property rights, as distinguished from possession, has its real explanation in the fact that it encouraged industry, thrift and accumulation of wealth which aided the social groups possessing them to survive. The occupation, natural rights, labor and legal theories of private property have been replaced by the social utility theory. The private property right in its various aspects is, then, limited by the principle of social utility.

Required reading. Seligman, Principles, ch. 9.

Suo^^ested reading. Hadley, Economics, pp. 26-34 ; Fetter, Principles, pp. 362-369 ; Gide, Principles, pp. 428-437 ; Ely, Outlines, (1893) pp. 257-264 ; Palgrave, Dictionary of Political Economy article Property.

4. Evolution of Freedom.

Freedom in the sense of positive capacity for self-determined action was unknown among savages. Subjection to nature, to the strong and to custom was accompanied by extermination of captives. Slavery, serfdom and the wage system, each introduced because of its relative economic superiority, were steps in advance. There is now a considerable degree of freedom as of marriage, movement, occupation, association, consumption, production, contract, trade. Liberty is not an end but a means to that higher development of individuality which is the only real freedom. Liberty except as based on equality and a sense of social responsibility is dangerous ; and hence we must by social control restrict liberty to secure freedom. Positive individual freedom is a social product.

Required reading. Seligman, Principles, ch. ii.

Suggested reading. Hadley, Economics, %% 29-44, 78-82 ; Fetter, Principles, ch. 44 ; Ely, Outlines, p. 42, pp. 267-270 ; Webb, Industrial Democracy, pp. 844-850; Problems of Modern Industry, ch. 10 ; Ritchie, Principles of State Interference , pp. 83-151 ; McKechnie. The State and the Individual, pp. 305-321 ; Ritchie, Natural Rights, pp. 135-147.

5. Evolution of Competition.

Competition, a form of freedom, has undergone development. At first largely a rivalry between groups it becomes more and more extensive within the group. Under modern industry competition has tended constantly to replace custom as a determinent of price. While more necessary, it is also more pregnant with danger. It is the cause of progress, selecting those who can best serve society, leading to accumulation of wealth, protecting the consumer, encouraging energy. It is found between commodities, between individuals, between markets, between classes, between countries. It involves dangers and without initial equality of competitors may not realize its benefits. It is limited and controlled by custom, co-operation, monopoly or government regulation.

Required reading. '$>^\^rci2iw^ Principles, ch. 10.

Suggested reading. Marshall, Principles^ (5th ed.) Appendix A; Economics of Indtistry, Bk. I., ch. 2; Hadley, Economics, %% 76, 77, 87, 97 ; Fetter, Pri?jciples, pp. 425-430; Hadley, Freedoni and Responsibility , ch. 5 ; Ely, Evolution of Industrial Society^ pp. 123-163 ; Palgrave, Dictionajy of Political Economy two articles on Competition.

6. Evolution of Economic Stages.

There have been various explanations of economic development ; as barter, money, credit economies ; or from status to contract ; or from a militant to an industrial society ; or through hunting, pastoral, agricultural, commercial, industrial stages ; or stone, bronze, iron, steel ages. Although these are all suggestive and partially true, they are inadequate. From the economic standpoint there are " three great stages known respectively as the self-sufficing economy, the trade or commercial economy, and the capitalist or industrial economy." (Seligman.)

Required reading. Seligman, Principles, ch. 5.

Suggested reading. Ely, Evolution of Industrial Society, pp. 3-73 ; Blicher, Industrial Evolution, chs. 1-3 ; Conrad, Grundriss; (1907), ler Teil, §40.

7. Evolution of industrial Organization.

a. Including under "industrial organization" the relation of producer to the consumer, of the different classes and occupations of workers to each other, of the different classes of workers to capital and to risks of sale, of hand work to capital, we find constant development of more complex relations.

b. Under the ' ^family system' ' ' ' production was carried on within the family, by the family, for the family." There was no market ; no wage ; no machinery ; little division of labor ; little capital ; little separation of industrial function. The productive unit was self-sufficing. Transition begins in the hiring of itinerant or more permanent workmen. This system is exemplified more or less fully in the slave plantation of early Rome, in the mediaeval manor, in the frontier farm, in the Southern plantation.

c. Under the ' ' guild ' ' or handicraft system the producer of a good produces it for others ; he owns tools and material ; he works by hand ; he works at a specific trade ; he may employ others ; but they are "help," on their way to independence and a status like his own ; he assumes the risk of finding a market and deals directly with the consumers of his products. In the Middle Ages such producers formed associations or guilds in each trade to promote the welfare of that trade. They came to regulate conditions of work and the character of goods and acquired large civic and political power.

d. Under the domestic system the work is done by craftsmen as under the guild system, but distributed and ordered by a capitalist who takes the risks of sale and often furnishes the materials. The typical producer under the domestic system did not own raw material or finished product and tended to rent the more expensive tools. This capitalist is not a hand-worker but an employer or entrepreneur. The market is a comparatively wide one. Means of transportation, of exchange and of handling capital are improved. In the textiles industries this system was dominant in England trom the sixteenth to the eighteenth century.

e. Under \}!\q factory system there is an enormous increase in capital in the form of buildings, machinery, power, materials. Not only materials but machinery and place of work are owned or are controlled by employer. To utilize power, machines must be in one place so that many workers are in one factory. The worker is divorced from ownership of the means of production, and his work is narrowly specialized. There is differentiation of industrial function. The market is greatly widened by enormously improved means of transportation. Exchange and credit are highly organized. This system began in England at the end of the eighteenth century as a result of great inventions in the textile manufacture.

f. The efficient cause of the development of the later systems has been the superiority of each over the preceding in producing goods cheaply. In some lines of work since such superiority has not existed, the development did not take place and we have survivals of older methods.

Required reading. Bullock, Selected Readings in Economics, ch. 5 ; and either Seager, Introduction, ch. I ; Seager, Principles, ch. i ; or Seligman, Principles, ch. 6.

Suggested reading. There is a large amount of literature upon the different phases of industry but many of these books are either too voluminous, too detailed, or too neglectful of essential distinctions to be of use in this course. Ashley, English Economic History^ passim as Vol. II., pp. 219-222; Biicher, Ijidustrial Evolution^ ch. 4 ; Hobson, Evolution of Modern Capitalism, chs. 2, 3 ; Toynbee, The Industrial Revolution, pp. 178-202 ; Veblen, Theory of Business Enterprise, chs. 2, 3.

8. Development of Economic Thought.

a. The economic thought of each age is a reflex of its economic life and economic problems.

b. The prevalence of slavery and the consequent contempt for labor limited the economic thinking of the ancient world i6 Development of Economic Society.

to questions of property right, division of labor, usury and money.

c. The predominant religious character of the age and the development of industry and commerce by free labor made the mediaeval thinking center around the ethics of price, interest and money.

d. The revival of commerce after the Crusades, changes of price due to money from the New World, debasement of coinage and particularly the growth of centralized states needing revenues, standing armies and navies, and owning colonies, aroused much practical politico-economic thinking. The resulting Mercantile System emphasized the necessity to a nation's welfare of a large stock of money gained from a favorable balance of trade ; of manufactures ; of shipping ; of large population ; and of colonies — all as essentials of a successful national policy. To secure these a detailed system of state regulation was developed.

e. The philosophical and political thought of the eighteenth century and the errors of the mercantilist thinking led to a revolt. The Physiocrats emphasized food rather than money as wealth ; agriculture as the productive industry since it alone was said to give a net product ; natural rights ; natural law ; and freedom of all economic activity from governmental control. Laissez-faire. Quesnay, Turgot.

/, Adam Smith was largely influenced by the Physiocrats, expressing the cosmopolitan point of view and proclaiming natural liberty as a means to general welfare. He finds in all industry the source of wealth ; and his theory of distribution is a reflex of contemporary economic changes and conditions. He showed the social value of economic selfinterest. His Wealth of Nations (1776) is the foundation of modern economic thinking.

g. Production for large markets, the necessity of profit, the differentiation of industrial classes, the increase of capital brought to the front problems of value and distribution. These were treated by the English school led by Ricardo, Malthus, Senior and summed up by J. S. Mill. Wealth, competition, non-interference were emphasized,

h. The unfortunate social results of the new industrial system and the dehumanized character of the contemporary economic theory led to revolts on ethical grounds by Ruskin and Carlyle and on theoretical grounds by the socialists like Karl Marx.

/. The historical school was a reaction from the deductive a priori vs\eih.od of the English school, advocating inductive study and insisting upon the relativity of economic theory.

J. The Austrian school of the present returns to the deductive method, but has a new psychological basis in its theory of utility.

k. Contemporary British and American economists, feeling the infiuefnce of all these lines of thought, using historical and deductive methods, accepting the theory of marginal utility, show, as Seligman says, " how and why social progress and the growth of capital are intimately bound up with the advance of the mass of workers. "

Required reading. Seligman, Principles, ch. 8.

Suggested reading. Andrews, Institutes, %% 5-15 ; Marshall, Principles, Bk I., ch. 4; Gide, Principles, pp. 7-14; Ingram, History of Political Economy ; Haney, History of Economic Thought; Cossa, Introduction, Historical Part ; articles in Palgrave, Dictionary, a.nA in th.e International Encyclopczdia ; Price, Short History of Political Economy in England ; Cohn, A History of Political Economy ; Seager, Economics, a lecture delivered at Columbia University.

Chapter III. Wants And Their Satisfaction: Demand

I. The Nature and Economic Significance of Wants.

Human wants vary with race, climate, stage of civilization, individual development physically, intellectually, aesthetically, morally, religiously. They are capable of indefinite expansion ; limited in intensity ; competitive ; complementary ; largely matters of habit and fashion. The want is the cause of economic activity. Wants cause activities,, but activities cause new wants.

ReQinred reading. Marshall, Economics of Industry, Bk. III., ch. 2 ; Seager, Principles, §§ 38, 41 ; Introduction, §§ 34, 37 ; Bullock, Selected Readings in Economics, pp. 236-245.

Suggested reading. Marshall, Principles, Bk. III., ch. 2. Bullock, Introduction, pp. 79-84 ; Fetter, Principles, ch. 2 ; Gide, Principles, pp. 40-45 ; Hearn, Plutology, ch. 1 ; Andrews, Institutes, pp. 190-194 ; Davenport, Outlines, % 8 ; Smart, Introduction to ttie Theory of Value, chs. 1-4.

2. Definitions Relating to Value.

Utility is capacity to satisfy a want. Value is power in exchange or an estimate of relative utility. Price is value expressed in money. Demand means the quantity that will be taken at a given price. Supply means the quantity that will be furnished at a given price.

Required reading. Seager, Introduction, § 26 ; Principles, § 29,

Wants and Their Satisfaction: Demand. 19

3. Wealth.

a. In defining wealth we hold to common usage and discriminate between wealth and welfare even though etymologically and ethically such distinction be unfortunate. Wealth (as used in Economics) does not necessarily mean abundance. Those goods having utility, which are external to the individual, and limited in amount constitute wealth. Wealth is that which has value. Wealth may be private or public (=social or collective). Some valuable sources or conditions of wealth are not wealth. Although from a logical and psychological standpoint there is no difference between the utility of a service and the utility of material wealth, services are not included in wealth.

b. There has been constant change in the forms of wealth with development of human desires. The forms of wealth at any time and in any country are determined by and reflect the prevailing civilization. A large amount of wealth at present consists of very durable but very indirect means of satisfying wants.

c. Since man's power to devote himself to higher aims and activities depends upon possession of wealth sufficient to satisfy fundamental needs and is often conditioned upon possession of other contributory wealth, wealth is essential to individual and social progress ; and the study of Economics is a study of that which conditions science, art and all higher life. Wealth does not necessarily advance welfare or civilization. It is the nature of man, his tastes and interests which determine what things are wealth ; but these in turn are affected by his choice and use of wealth.

Required reading. Seligman, Principles, §§ 4, 5 ; Marshall, Economics of Industry, Bk. II., chs. i, 2 ; Taussig, Principles, pp. 3-8.

Suggested readifig-. Marshall, Principles, Bk. II., chs. 1,2; Davenport, Outlines, ch. 2 ; Bullock, Introduction, pp. 84-87 ;

20 Wants and Their Satisfaction ; Demand.

Fetter, Principles, ch. 3 ; Gide, Principles, pp. 46-49 ; Andrews, Institutes, §§1, 2, with notes; Clark, Philosophy of Wealth, ch. 1; Ely, Outlines, (1908), pp. 95-100 ; Clark, Essentials of Econoniic Theory, pp. 5, 6.

4. The Nature of Demand as Based Upon Diminishing Utility.

a. "The utilities of additional units of any good to any consumer diminish naturally as his supply of units of that good increases." (Seager).

b. Consequently, although he might use much more of the articles if it were a free good, he ceases his purchases at the point where, in his estimation, the utility of the last addition to his stock is only equal to its cost. The utility of this last portion acquired is the marginal utility of the commodity to him.

c. It follows that, as the price is lowered, the purchase of additional units will be made since their utilities will successively equal the falling price ; and, as the price rises, purchases will be diminished, since this rising price will successively be greater than the estimate of the utility of the units previously bought. Hence results the Law of Demand, that, other conditions remaining the same, the amount demanded increases with a fall and decreases with a rise in price. The larger the supply, the lower the price at which it can be sold.

d. Demand schedules of individuals are different, because the marginal utility of money varies to different persons and because of varying intensity of desire.

e. "Value is not merely the expression of marginal utility; it is the expression of social marginal utility." (Seligman). "Value in industrial society is the result of social valuation. It is not so much man's estimate as society's estimate of marginal utility." (Seager).

/. " Most goods are not simple utilities but bundles of utilities," (Seager) and " value is the expression of the social

Wants and Their Satisfaction : Demand. 2 1

marginal increments of utility which are bundled together or united in anything, and each of which is marginal to a different class. " (Seligman).

Required reading. Taussig, Principles, ch. 9 ; or Seager, Introduction, §§ 35, 47-53 inclusive ; or Principles, §§ 39, 51-58 ; or Marshall, Economics of Industry, Bk, III., ch. 3, with Johnson, Introduction, pp. 21-35 ; o^ Seligman, Principles, ch. 12.

Required reading. Bullock, Selected Readings in Economics, pp. 245-254, an extract from Jevons, The Theory of Utility.

Suggested reading Marshall, Principles, Bk. III., ch. 3 ; Fetter, Principles, pp. 21-29 ; Gide, Principles, pp. 52-59 ; Bullock, Introduclion, pp. 88-97, 110-113; Flux, Economic Principles, pp. 20-25 ; Pierson, Principles, pp. 54-61 ; Carver, Distribution, pp. 1-27; Clark, Distribution, ch. 16; Davenport, Outlines, pp. 14-16, 35-37; Smart, Introduction to Theory of Value , clis. 6, 7.

5. Elasticity of Demand.

Elasticity of demand refers to the degree in which demand responds to changes in price. It varies greatly according to the nature of the article and the income of the purchaser.

Required reading. Marshall, Economics of Industry, Bk. III., ch. 4; ^Q?igtx, Introduction, § 38; or Principles, § 42 ; Seligman, Principles, § 102.

Suggested reading. Marshall, Principles, Bk. III., ch. 4; Fetter, Principles, p. 29; Flux, Economic Principles, pp. 25-31.

6. Comparison of Utilities.

" If a person has a thing which he can put to several uses, he will distribute it between these uses in such a way that it has the same marginal utility in all. For if it had a greater marginal utility in one use than another, he would gain by taking away some of it from the second use and applying it

22 Wants and Their Satisfaction: Demand.

to the first." (Marshall). Similarly one's total expenditure of money or effort tends to be so directed that marginal utilities in different lines will be equal,

" The utility of future goods is less to the normal consumer than the utility of present goods of like kind and quality by an amount varying directly with the degree of futurity." (Seager).

Required reading. Marshall, Economics of Industry ^ Bk. III., ch, 5 ; Seager, Introduction^ § 36, or Principles^ § 40.

Suggested reading. Marshall, Principles, Bk. Ill , ch. 5 ; Bullock, Introduction, % 61 ; Davenport, Outlines, %% 29-32.

Chapter IV. Production Of Wealth : Supply

A. GENERAL. CONSIDERATIONS.

a. Production is the creation of utility ; the utility created may be of form, of place, or of time. Consumption is the destruction of utility.

b. Production involves sacrifice and time.

c. The factors of production are nature, labor, capital. Since production is a social process, the efficiency of these factors will depend largely upon the system or organization that brings them together ; and upon due appreciation of the significance of the human factor.

Required reading. Seligman, Principles, c\v. i8; Seager, Introduction, §§ 27, 28; or Principles §§ 3o» 31-

Suggested reading. Marshall, Principles, Bk. IV., ch. 1 ; Fetter, Principles, ch. 28 ; Bullock, Introduction, pp. 115-118 ; Andrews, Institutes, §§ 18-22; Mill, Principles, Bk. I., chs. 1, 2, 3 ; Clark, Philosophy of Wealth, ch. 2 ; Nicholson, Principles, Bk. I., ch. 2; Elements, pp. 32-47.

B. NATURE.

1. Classification of Nature's Contribution to Production.

2. Influence of Nature Upon Man's Economic Life.

Required reading. Bullock, Selected Readings in Economics, pp. 1-22; being Shaler, The Effects of the Physiography of North America upon men of European origin; Seligman, Principles, §§ 16-19.

3. Exhaustion of Natural Wealth.

a. Some natural resources may be permanently exhausted.

b. Some natural resources are incapable of permanent exhaustion.

c. Some natural resources replace themselves more or less completely by growth.

4. Man's Ability to Prevent Exhaustion and Increase Pro*

ductivity.

a. Minerals cannot be increased. Necessity of economy in utilization. Progress of science makes possible utilization of low grade ores, which practically means an increase in quantity.

b. Fisheries in some cases seem inexhaustible. In other cases much may be done to overcome tendency to exhaustion.

c. Forests. American tendencies. Need of scientific forestry.

d. Limited area of desirable building land. Methods of overcoming this limit. Modern building methods. Rapid transit.

e. Fertility of the soil for agricultural uses may be increased by cultivation ; soil mixture ; irrigation ; draining and clearing ; fertilization ; artificial climatic conditions.