Introduction to economic problems

Preface

This book was written to provide a text for the second semester's work in Introductory Economics. This work is designed to follow a study of the elementary principles of Economics, which is usually given during the first semester of a year's course in Economics. It is designed particularly to follow Turner's Introduction to Economics.

The need has arisen for a book which treats economic problems from two points of view: (i) to illustrate and enforce the economic principles studied in the first course; (2) to provide up-to-date facts and discussions of the economic problems concerning which the student should develop opinions. The war together with recent legislation have made it necessary to rewrite much of the material on economic problems.

After each chapter, exercises are provided. Some of the questions are intended to test the care with which the students have read the text. Others of the questions are designed to be the basis of discussion. Still others of the questions are meant to suggest the wider aspects of the problems.

It has been my aim to present the common opinion of economists rather than to strive for originality.

My obhgations to others are great. First, I owe much to my teachers: J. L. Laughlin, Thorstein Veblen, H. J. Davenport, R. F. Hoxie, L. C. Marshall, J. A. Field, C. W. Wright, A. C. Whitaker, A. S. Johnson, and John Cummings. Second, much is due to those whose text-books I iv Prejojce

have used: R. T. Ely, A. S. Johnson, Alfred Marshall, F. W. Taussig, 11. R. Seagcr, W. II. Hamilton, and F. A. Fetter. Third, my colleagues, Willard Fisher, R. L. McClung, A. L. Faubel, and lOugone Greidcr, have helped me with jiarticular chapters. I'^inally, Dean J. R. Turner has given at all stages most heli)ful suggestions concerning the general plan and the methods of presentations of the separate problems.

Chapter I Page

The Study of Economic Problems i

I. What Arc Economic Problems? 2. The Relation of Economic Problems to Business Prol)lems. 3. Reasons for the Study.

4. The Truth vs. Propaganda. 5. The Difficulties of the Economist. 6. The Joys of the Economist. 7. The War and Economic Problems. 8. Attitude toward Conclusions. 9. Exercises.

Chapter II

I. The Factors in Productive Capacity. 2. Mining. 3. Agriculture. 4. Lumber. 5. Manufactures. 6. Transportation. 7. Business Management, 8. The ItlTcct of the War on Productive Capacity. 9. Exercises.

CHAPTER III Marketing 20

I. The Problem of Marketing. 2. The Functions of the Middleman. 3. Salesmanship and Advertising. 4. Methods of Marketing Farm Products, 5. The Chicago Board of Trade, 6. Speculation and Hedging. 7. The Marketing of Securities. 8. The New York Stock Exchange. 9. Speculation in Stocks. ID. Retail Dealers in Groceries. 11. Other Types of Retailers, 12, Types of Wholesalers. 13. Wholesale Consumption. 14. Organization for Marketing in Foreign Countries. 15. Exercises,

CHAPTER IV Cycles in Trade and Industry 58

I. The Course of Cycles. 2. The Periodicity in Business. 3. Mitchell's Theory of Business Cycles. 4. Rising Prosperity,

5. Development of Stresses. 6. Crisis and Panic. 7. Depression. 8. Mitigating the Crises. 9. Exercises, vi Contents

Chapter V Page

The Operation of the Federal Reserve System . . 72

I. The Weekly Statement. 2. Cash Items — Operation of the Gold Settlement Fund. 3. Bill Holdings — Trade Acceptances.

4. United States Bonds and Certificates. 5. The Banking- House. 6. The Collection System. 7. The Capital Liabilities. 8. Deposits — Services for the Government — Mobilization of Reserves. 9. Notes of the Banks. 10. Other Liabilities — Earnings. II. The Reserve Ratios. 12. The Discount Policy of the Federal Reserve Board. 13. The Aid to Foreign Trade. 14. Summary of Benefits of the System. 15. Exercises.

Chapter VI

I. The Problems of the Distribution of Wealth. 2. Utopian Socialism. 3. The Theoretical Basis of Socialism. 4. Socialist Criticism of the Present Order. 5. Consideration of the Criticism. 6. Socialist Proposals. 7. The Socialist Party. 8. Guild Socialism. 9. Exercises.

CHAPTER VII Labor Organizations 107

I. The Wage Bargain. 2. The Aims of Trade-Unions. 3. Types of Unions and Federations. 4. Collective Bargaining.

5. The Strike. 6. The Boycott, the Union Label, and Other Activities. 7. The Open and the Closed Shop. 8. Trade-Union Leadership. 9. Employers' Associations. 10. Arbitration and Conciliation. 11. The Kansas Industrial Relations Court. 12. Organized Labor and the War. 13. Exercises.

CHAPTER VIII Legal Regulation of Conditions of Employment . 129

I. The Reasons for Regulation. 2. Sanitation and Safety. 3. Regulation of the Labor of Children. 4. Regulation of the Labor of Women. 5. Minimum Wage for Women and Children.

6. Regulation of the Labor of Men. 7. Exercises.

Chapter IX

I. The Function of Insurance. 2. The Insurable Risk. 3. The Moral Hazard. 4. Fire Insurance. 5. Other Property Insurance. 6. Life Insurance. 7. Exercises.

Contents vii

Chapter X Page

I. The Need for Social Insurance. 2. Responsibility for Accidents Under the Common Law. 3. Employers' Liability Laws. 4. Workmen's Compensation Laws. 5. The New York Compensation Law and Other Laws. 6. Health Insurance. 7. Old-Age and Invalidity Insurance. 8. Unemployment Insurance. 9. Exercises.

Chapter XI

I. The Place of Transportation in Economic Organization.

2. Stages of Development of Internal Transportation in the United States. 3. The Development of the Technic of Railroad Transportation. 4. The Development of the Railroad Net in the United States. 5. Railroad Competition. 6. Railroad Rate Theories. 7. Classification of Freight. 8. Railroad Freight Tariffs. 9. Passenger Service and Rates. 10. Present Inland Water Transportation. 11. Early Merchant Marine and the Reasons for Decay. 12. Coastwise Shipping. 13. The War and Shipping. 14. The Panama Canal. 15. Exercises.

Chapter XII

I. The Demand for Regulation. 2. The Scope of the Interstate Commerce Act. 3. The Powers of the Interstate Commerce Commission. 4. Procedure. 5. The Regulation of Rates. 6. The Long and Short Haul Clause. 7. The Commodities Clause. 8. The Application of the Anti-Trust Law to Railroads. 9. Federal and State Regulation of Interstate Commerce. ID. State Railroad Commissions and Regulations. 11. The Railroads and the War. 12. The Esch-Cummins Law. 13. Railroad Valuation. 14. Exercises.

Chapter XIII

I. What Is Competition? 2. What Is Unfair Competition?

3. The Federal Trade Commission and Unfair Competition.

4. (a) Deceiving the Consumer. 5. (b) Coercing Middlemen. 6. (c) Injuring Competitors. 7. (d) Misuse of Government Protection and Public Utilities. 8. Exercises.

viii Contents

Chapter XIV Page

I. What Is a Trust? 2. Causes for the Growth of Trusts. 3. Minor Causes for the Growth of Trusts. 4. The Common Law About Combinations. 5. Forms of Combination. 6. Pools.

7. The Trust in the Legal Sense. 8. The Holding Company, 9. The Merger or Amalgamation. 10. The American Tobacco Company. 11. Exercises.

Chapter XV

I. The First Attitude of the Public. 2. The Evils of the Trusts. 3. State Legislation. 4. The Difficulties of State Regulation. 5. The Sherman Anti-Trust Law. 6. Early Effect of the Sherman Law. 7. The Later Decisions Under the Sherman Law. 8. The Seven Sisters Laws of New Jersey. 9. The Federal Trade Commission Act. 10. The Clayton Act. 11. The Federal Trade Commission. 12. Difficulties in Regulating Trusts, 13. Exercises.

CHAPTER XVI Foreign Trade and Foreign Exchange 263

I. The International Division of Labor. 2. Trade Based on Natural Differences. 3. Trade Based on Differences in Economic Development. 4. Trade Based on Specialization. 5. The Meaning of Foreign Exchange. 6. The Demand for and Supply of Foreign Exchange. 7. Mint Pars and Gold Points.

8. The Balance of International Payments. 9. The Correctives of the Exchanges. 10. Arbitrage, il. Exchange Rates with Countries on a Paper Standard. 12. Exchange Rates with Countries with a Silver Standard. 13. The Gold Exchange Standard. 14. The Regulation of Gold Movements. 15. The Effect of the War on the Exchanges. 16. Dollar Exchange. 17. Exercises.

Chapter XVII

I. What Is a Tariff ? 2. Technical Terms of a Tariff. 3. The Effect of a Tariff on Imports. 4. Revenue Tariffs. 5. Protective Tariffs. 6. Free Trade vs. Protection. 7. The Course of a Tariff Bill in United States. 8. The Political Evils of a Tariff.

9. The History of the Tariff in the United States, Illustrating the

Contents ix

PAGE

Arguments Used. lo. The Tariff Commission, ii. The Present Discussion. 12. The Problem of Dumping. 13. The Tariff and the Debts Owed Us by Europe. 14. Discriminations and Unfair Competition in Foreign Trade. 15. Reciprocity Treaties. 16. Colonial Preference. 17. The Open Door. 18. Exercises.

Chapter XVIII

I. The Scope of Public Finance. 2. The Sources of Public Revenue. 3. Government Borrowing. 4. Justice in Taxation. 5. Rates of Taxation. 6. The Incidence of Taxation. 7. Government Expenditures. 8. The Budget. 9. Exercises.

CHAPTER XIX Receipts and Expenditures or the Federal Government 323

I. The Principal Sources of Revenue. 2. Financial Transactions of 1920. 3. War Profits-and Excess-Profits Tax. 4. The Federal Income Tax. 5. The Estate Tax. 6. Internal Revenue Duties. 7. Details of Expenditures. 8. The Problem of the Debt. 9. Revision of Taxation. 10. Exercises.

CHAPTER XX Receipts and Expenditures of Cities and States . 337

I. The Expenditures of Various Government Bodies. 2. The Finances of New York City. 3. The Receipts of New York City. 4. The Expenditures of New York City. 5. The Receipts and Expenditures of Philadelphia. 6. The Receipts and Expenditures of State Governments. 7. The General Property Tax. 8. Corporation Taxes. 9. The Single Tax on Land. 10. State Income Taxes. 11. State Inheritance Taxes. 12, Exercises.

Index 357

Chapter I The Study Of Economic Problems

I. What Are Economic Problems? Facts Involved in Economic Problems. 2. The Relation of Economic Problems to Business Problems. 3. Reasons for the Study. 4. The Truth vs. Propaganda. 5. Difficulties of the Economist. 6. The Joys of the Economist. 7. The War and Economic Problems. 8. Attitude toward Conclusions. 9. Exercises.

I. What Are Economic Problems? — Economics is the science of wealth, and as such it is concerned with the principles which govern the production, distribution, and consumption of wealth. Economic problems have to do with the difficulties involved in the application of these principles to specific cases. We may recognize three broad divisions. First, some arise because men have to deal with each other. Thus, to a large extent, the labor problem is a matter of adjustment of personal relations in industry. Other problems have to do with the relations of men as competitors. Second, some arise out of man's dependence on natural resources. Thus, productive capacity is, to a great extent, dependent upon the resources of a country. Third, some problems arise in connection with the effort of the government to regulate industry and commerce. Thus, we have the problems of railroad regulation and the control of trusts.

Facts Involved in Economic Problems. — There was an old idea that all human knowledge could be accurately divided, as land is divided, and that a certain area could

2 IntrodMction to Economic Problems

be given to economics and other areas given to political science, ethics, psychology, chemistry, physics, zoology, astronomy, and numerous other subjects. The common expression "fields of knowledge" reflects this old idea. The economist was supposed to keep his hands off any facts not in his particular field. Our present view places no such limitation on the activities of the economist in dealing with economic problems. We start with some question, such as the price of cotton, and we find that we must consider boll- weevils, the chemistry of soils and fertilizers, the psychology of tenant-farmers, and many other matters. Anything which affects an economic problem may come within our survey.

2. The Relation of Economic Problems to Business Problems. — The economic problem is a general problem and is studied from the point of view of the public welfare. The business problem is a particular problem and is studied largely from the point of view of private profit. Thus, the economic problem of the railroads deals, among other things, with the effect of transportation on economic development, the means for providing cheap and efficient transportation, and public regulation of railroads to insure equality of treatment to all shippers. To the board of directors of a railroad the business problem is how to develop traffic for their railroad and how, living up to all of the laws and regulations prescribed, to conduct their business in such a way that they will have money to pay interest on their bonds and dividends on their stocks. Or, again, the economic problem of labor deals with such things as the supply of labor, the conditions under which labor is performed, and the general aspects of the determination of wages. The business man as an employer thinks of the labor prob-

The Study of Economic Problems 3

lem in terms of costs; how can he hire and supervise his labor so that he can produce at a cost which will enable him to sell at a profit?

3. Reasons for the Study. — The justification of our study of economic problems is found in the absolutely fundamental character of economic conditions and in the desire to be good business men and good citizens.

All civilization must have a material basis. We must be fed and clothed before we can enjoy any of the so-called "higher things." We have seen, in some of the European countries, the ghastly results which follow the breakdown of the economic organization. We wish to prevent such an occurrence in this country.

The good business man must understand the general economic problem before he can solve his own particular business problem successfully. In the old days of a simple local economic organization, a business man, by mere observation, might become aware of most of the factors that entered into his problem. But now we have an economic organization which is almost inconceivably complex, and which embraces, in many of its aspects, the whole world. In such a complicated situation the business man who relies on mere observation is sure to leave out many important factors. And even if he does consider most of the factors, he may not be able to interpret them correctly.

All may not intend to be business men, but all are citizens. The government is assuming an increasing control over economic activity. This control has great possibilities for good or for harm. The results will be good if the voters, in deciding on general policies, and the legislators, in drafting specific laws, make their decisions on the basis of an adequate analysis of the economic problems involved.

4 Introduction to Econmnic Problems

4. The Truth vs. Propaganda. — The economist in studying economic problems is seeking to find the truth. He gets all of the facts possible and from these facts he draws his conclusions. The propagandist, too often, begins with his conclusions and selects only those facts which help him in his propaganda. We are not condemning all propagandists. They are useful in getting things done, if they happen to start propaganda for something which needs to be done. But we must never forget the difference in their point of view and that of the economist; we must be on the lookout for propagandists who masquerade as scientists.

5. Difficulties of the Economist. — The methods recognized in science are experiment, observation, and comparison. The physical sciences, such as chemistry, use experiment. In the experiment the scientist controls the conditions. If he wishes to know the effect of hydrochloric acid on zinc, he gets pure acid and pure zinc and puts them together. Then he records the result, and that experiment need not be done again. The economist cannot usually experiment, as he cannot control the conditions. Perhaps he would like to try a central bank in the United States. He cannot start the bank privately. He must persuade Congress to do it. Some experiments are too costly either in money or in human life to be tried.

Other scientists can quote authorities for the facts they take as the basis of their reasoning. The economist must always be on his guard. Statements found in print may be mere propaganda; they may be based on incorrect reasoning, or they may have been correct at the time and in the place they were written, but have no application at the present time. Thus, there is no justification for the quotation of Mill's opinion on the eft'ect of the introduction

The Study of Economic Problems 5

of machinery, which was based on conditions in England in 1848, as if it had any bearing on conditions in the United States at the present time.

Because he cannot experiment, the economist must rely on observation and comparison. In applying these methods the difficulties arise from the intricate complexity of economic phenomena. Thus, prosperity and depression are the result of numberless interacting causes, and it is almost impossible to assign the exact degree which some one factor contributed to prosperity or depression. Usually we must be content to discover whether the factor helped or hindered prosperity.

The historian has an easier time than the economist; the historian can get at documents, which, at the time, the economist may not even have known about. No tantalizing delay is experienced in getting the statistics needed for history.

6. The Joys of the Economist. — In spite of these difficulties the economist has his joys. He is dealing with real, alive, present-day people. He is helping to lay the basis for all that is good in social development. There is no dull monotony of unchanging conditions. He has variety enough to make his life very spicy.

7. The War and Economic Problems. — The war deranged the economic organization of the world. It altered the relations of the factors of production. It disrupted lines of trade. It destroyed much capital and killed or maimed many laborers. Reconstruction presents grave problems, many of them economic, which must be solved if civilization is to persist.

The war, then, has presented economic problem in urgent form. It has also aided in the general solution of the prob-

Icms. 'I\) one depending on llie methods of observation and comparison, new conditions and rapid changes are desirable. The war brought many new conditions and changes rapid enough to suit any one. These changes throw thi' prol)lems in striking rehef. In orcHnary times it is hard to gel i)eople lo reah/e the effects of rising i>rices. liut no one couhl be .so stupid as not to have observed the edects of the doubling of prices during war times.

Then again, many new things were tried during the war. We had more governmental interference in business than ever before. When we get the facts, no doubt many interesting things will be learned from the experience of Russia with communism. During and aftc-r the war, there have been heretofore uni)aralleled expansions of bank credit and paper currency. In taxation, experiments were tried with exce.ss-protils taxes and steej)!)' progressive income taxes.

8. Attitude toward Condusions. Our conclusions cannot be stated so absolutel)' as those in Economic Theory. There, with the premises carefully laid down and the logic rigorously correct, we may announce our conclusions with ct)nridence. In our study of luonomic Problems we must be more modest. Our conclusions are tentative. They are the best that we can reach on the basis of the facts we have at present. We recogni/e that the conclusions may need to be revised if (he underlying conditions change, or if wi- come into i)ossession ol ni>w facts.

Q. Exercises, i . Suggest differences in the point of view of the econt)mist and the entomologist in studying the boll-weevil or the greenbug.

2. How much does the business man consider public welfare?

The Study of Economic Problems 7

3. Does it pay for the business man to consider public welfare ?

4. Contrast the tariff as an economic problem and as a business problem.

5. Indicate precisely the relation of economic activity to the development of painting and music.

6. Show how the success of the New York banker may require knowledge of conditions all over the world.

7. How does the adoption of the initiative and referendum affect the need for the study of economic problems?

8. State the attitude of the propagandist to truth and to facts.

9. Supposing that the economist were all-powerful, outline a series of experiments to decide the best form of railroad control in the United States.

10. Why be an economist?

11. Make a list of the ways the war affected the factors of production.

12. How did the war affect private property?

13. What caution is needed in arguing from war-time experiences ?

14. Why cannot we be absolutely sure of the conclusions we reach concerning economic problems?

Chapter II Productive Capacity

I. The Factors in Productive Capacity. 2. Mining. 3. Agriculture. 4. Lumber. 5. Manufactures. 6. Transportation. 7. Business Management. 8. The Effect of the War on Productive Capacity. 9. E.xercises.

I. The Factors in Productive Capacity. — Productive capacity is of vast importance to the welfare of a nation, for upon it the people depend for the goods and the services which make Ufe possible and pleasant. We may state in general terms conditions which make a country productive.

First, the natural resources must be varied and abundant : agriculture demands rich land with a varying degree of heat and moisture; mining requires deposits of minerals so situated that they can be easily worked; transportation is facihtated by natural waterways and a topography that permits easy railroad construction.

Second, the people must be able and willing to work. They must have bodies endowed with physical strength, minds which apply the strength, and the moral qualities of faithfulness and honesty in work.

Third, the people in working with the resources must be aided by machines and equipment and directed so that the best methods will be used and the skill of each worker utilized to the best advantage. A short-time consideration of productive capacity might be made on the basis of the assumption that the equipment of society can be taken as fixed. A longer discussion would consider the possibilities of exhaustion of resources and changes in the education of the people and the number and efficiency of machines which they use in production.

2. Mining. — We shall try to illustrate some of the possible meanings of productive capacity by statistics. For example, we might take productive capacity in the sense of the materials which furnish a potential supply. Thus, in the following table is given what might be called the potential supply of coal.

ESTIMATES OF HIGH-GRADE COAL AT MODERATE DEPTH »

Amount in Thousands of Millions or Tons

World 4,400

China 995

Siberia 67

Great Britain 190

' Eckel, E. C, Coal, Iron and War, pp. 111-114.

It is interesting to contrast with this table the amounts of coal actually produced.

COAL PRODUCTION FOR 1916 IN SHORT TONS 2

Amount in Thousands of Millions of Tons

Great Britain 287,110,153

• Finlay, J. R., Cost of Mining, p. 84.

We notice that the United States heads both lists; that is, it has the greatest potential supply of coal, and actually produced in 191 6 more coal than any other one country. But frequently there does not seem to be any particular connection between the rank in potential supplies in coal and the annual production. Thus, China, which ranks second with reference to potential supply, is far down in the list with reference to annual production, and Great Britain, which is second in actual production of coal, ranks rather low with reference to potential supply. Another consideration which must be borne in mind in talking about supplies of things such as coal is that they are wasting assets. Once used, our coal supply is gone. Our present industrial organization is based primarily on coal, but our experience and development of the past would make it dangerous to predict that no new source of power will not in the future take the place of coal. After all, some may object to our analysis so far on the ground that it seems to depend too much on the accident of the location of political boundaries. We may prefer to test productive capacity in the coal-mining industry by the amount of product per man.

TONS OF COAL PRODUCED PER ANNUM PER PERSON EMPLOYED!

Years

Australia

1 886-1 890

1891-1895

1896-1900. . . .

1901-1905 iqio

312 271 298

275 271 266

257 260

244'

613 660

333 358 426

359 388 441

IQII

IQI2

> Barker, J. Ellis, Economic Statesmanship, p. 192.

I Year of strike.

Obviously, the greater productivity in the United States is to be attributed mainly to the richness of our natural resources and to the excellent equipment with which the miner works. Besides, the miner's union has not been strong enough to limit output.

3. Agriculture. — Next we may consider agriculture. For our first figures we may take the number of people engaged in agriculture.

PERSONS ENGAGED IN AGRICULTURE'

Year

Number

I9IO.

United States. . . .

Austria-Hungary .

British India

United Kingdom .

12,388,623

385.323 14,121,055

15,782,669 2,262,454

' Year-Book of the Department of Agriculture, 1919, pp. 747-749.

In one sense we might take the total area of the countries as a possible supply of agricultural land, but it is probably better to take the area actually under cultivation. CULTIVATED LAND^

Year

Number of Acres

I9II

I9II

19II

United States. . . .

Austria-Hungary .

British India

United Kingdom.

' Year-Book of the Department of Agriculture, 1919, pp. 747-749.

We may take the number of horses in the country as indicating one of the factors of agricultural production. We are not justified in concluding that the same proportion of the horses in the country are used in agriculture; but, as the statistics do not distinguish between horses used on the farms and horses used in the cities, we are forced to take the total,

HORSES IN THE VARIOUS COUNTRIES i

Year

Number

1913- 1917.

United States. . .

Austria

United Kingdom .

22,529,000 1,916,000

' Year-Book of the Department of Agriculture, 1919, pp. 644-647.

The figures for agricultural machinery are not available in terms of individual machines and the comparison by value would involve numerous difhculties. A significant item is that on December 31, 1918, in the United States there were 314,936 tractors on the farms. ^

It will be almost impossible to take the agricultural produce as a whole. We can, however, get figures for the production of separate crops, particularly wheat, as it is very widely produced. We take the average production over a period of time to eliminate the variations in crops which arise from the fluctuations in the weather.

' Year-Book of the Department of Agriculture, 1919, p. 745.

AVERAGE PRODUCTION OF WHEAT FOR THE YEARS 1909-1913 1

Bushels

Bushels

Spain

7,885,000

United Kingdom . .

Netherlands

^ Year- Book of Department of Agriculture, 1919, pp. 517-519.

We may eliminate the accidents of size by giving the yields per acre.

AVERAGE YIELD OF WHEAT PER ACRE, 1901-1910 2

Bushels

Bushels

United Kingdom. .

Netherlands

Sweden

31-9

315 27.6

29.1

Manitoba

18.2

17.8

II-3

9-5

Taoan

' Year-Book of the Department of Agriculture, 1919, p. 24.

The statisticians of the Department of Agriculture have constructed an index-number of productivity per acre of the cultivated area of the different countries on the basis of the six most important crops; namely, wheat, oats, rye, barley, corn, and potatoes. The average yield per acre for a number of years for the given crop is expressed as a percentage of the average yield for all countries. These index-numbers for the per-acre yield of the single crops are averaged to get the index-number for the country as a whole by weighting each crop or the index-number for each crop by the acreage devoted to that crop. Thus, loo would equal the weighted average of all the countries.

INDEX-NUMBER OF PRODUCTIVITY PER ACRE IN AGRICULTURE »

Index-No.

Index-No.

Netherlands

United Kingdom . .

Germany

Roumania

94 84

75 72

Japan

Sweden

> Year-Book of the Department of Agriculture, 1919, p. 733-

It is noticed that the United States comes low in the list. However, we need to make the same inquiry as we did in the case of coal-mining. What is the production per man? One authority says that each American farmer produces 2.5 times as much as the individual in Belgium; 2.3 times the individual in England; 3.2 times the individual in France; 2.5 times the individual in Germany; and 6.0 times the individual in Italy.*

In Belgium we get a high }ield per acre at a lower level of comfort. In the United States the unit per acre is lower (though not the lowest), but it is combined with a high level of comfort. We cannot indicate statistically the skill of the farmers in the United States; but we may consider the wide spread of agricultural education, the fact that we have more than sixty agricultural experiment stations, and the fact that agricultural machinery is widely used.

* Year-Book of Department of Agriculture, 1919, p. 25.

Agriculture, if carried on in a scientific manner, does not exhaust the soil; so we may consider the figures as indicating wliat may happen in agriculture for an indefinite period.

4. Lumber. — The matter of lumber production is midway between mining and agriculture. Lumber comes as the result of growth of trees. In the United States the lumbering operations have, in general, been carried on in a way which results in the destruction of the forests. European countries have nearly all practised scientific forestry, and they get what is called a crop of trees maturing each year. In the United States we have made a start at this sort of forestry.

FOREST AREAi

Forest Lands Country (Square Miles)

United Kingdom 5,ooo

European Russia 761,772

Germany 54,ooo

Austria 41,100

Norway 26,900

Sweden 90,241

Japan, including Formosa 29,000

5. Manufactures. — We have already given the statistics for coal, which, of course, is an extremely important factor to the development of manufactures. Perhaps the next most important material is pig iron, since it is the basis either of material for manufactures or the basis of the machines used in manufacturing.

1 Smith, J. Russell, Industrial and Commercial Geography, p. 442.

ESTIMATED PRODUCTION OF PIG IRON IN THE WORLD FOR 1915 »

Tons of • Country 2,240 Pounds

Great Britain 8,793,659