not exist. Natural Resources comprise the surface of our globe,
together with all natural objects external to Man and in their natural
condition, upon the surface, under the surface, and above the surface,
including the air surrounding the surface.
Through applications of the energies of the first to the offerings of
the second, Artificial Objects are produced, and these constitute the
third of the three.
To one or another of those three natural categories every variety of
detail that may be involved in any Economic problem must be assigned.
Not so to assign those details to their appropriate categories is to
invite confusion of thought and to risk arriving at false and socially
dangerous conclusions.
The Economic student who mixes such Natural Resources as building
sites with such Artificial Objects as buildings, or natural deposits
of minerals with mining machinery, or natural surfaces with railway
roadbeds and tracks and equipment, or farming tracts with farm
improvements, or human slaves with real estate or stocks of merchandize
or factory mechanisms, makes an inexcusable blunder.
Such mixtures may be unobjectionable in accountings of the assets of
a private business for private purposes; but in general Economics
they are perplexing and misleading. In this comprehensive social
science every Economic detail must be classified in harmony with the
three Basic Facts--Man, Natural Resources and Artificial Objects,--or
confused thinking will result. To make those classifications, however,
is to lay a firm foundation for correctly estimating Economic phenomena
of all possible kinds and in all their relations.
The human factor, Man--an impossibility without Natural Resources in
the comprehensive sense of that term,--applies his energies of mind
and body to the Natural Resources of our terrestrial globe and its
enveloping atmospheres, thereby producing and for his satisfaction
consequently consuming every variety of Artificial object within the
range of his Economic desires and his Economic capabilities. This is
true of Man and of Man only.
Lower animals do not produce Artificial Objects. Do they cultivate?
No. Do they design or invent? No. Do they Trade? No. Do they in any
way improve? No. As was eloquently said by a distinguished Economist
of the last century, “the sea-gull of the English Channel who poises
himself above the swift steamer, wants no better food or lodging than
the gulls who circled round as the keels of Caesar’s galleys first
grated on a British beach.”
If wild birds make nests and wild animals make burrows or build dams,
and wild bees make honey, so do wild berry bushes grow berries and
wild apple trees bear apples; yet who would think of classifying wild
fruits as Artificial Objects? Manifestly, uncultivated fruit is as
truly in the category of Natural Resources as is the wild tree or
bush that bears it. And how do wild animals and their characteristic
products differ in that respect from wild fruit bushes and wild fruit
trees? Evidently in no wise at all. Their products of nest and burrow
and water-dam and all the rest, like the leafing and the fruitage of
the tree and the bush, are natural objects. They are not artificial.
An Artificial Object is a product of human invention and construction.
For every purpose of Economic classification, wild animals, like wild
trees and wild bushes and wild Nature in all its varieties, belong in
the category of Natural Resources. When the wild trees or the wild
bushes are cultivated, or the wild animals are domesticated, they pass
into the category--as manifestly as buildings and farm produce do--of
Artificial Objects drawn forth from and upon Natural Resources by Man.
If now we unravel the countless and confusing Economic phenomena of
our world by assigning each miscellaneous fact as it faces us to its
natural place in the three categories or Basic Facts, and then observe
with common-sense acuteness the natural laws of cause and effect that
govern the mutual relations of those Basic Facts, we put ourselves in
position to solve correctly every Economic problem that can challenge
solution. Not to do so is to invite confusion of thought and false
conclusions. Those Basic Facts are the “Big Three” of the Economic
universe.
Hints at all this came to us in passing through our Lesson on
Economics, our Lesson on Money, and our Lesson on Trade. For
confirmation of those hints and of the generalizations of the present
Lesson, let us with Money in hand and Trade in mind visit one of the
Trade terminals which are known in every-day speech as “retail stores.”
What do we see at this “store” but a complex aggregation and
combination, in multitudinous and confusing variety, of the services of
Man in producing Artificial Objects from and upon Natural Resources to
ultimate consumers through channels of Trade and in terms of Money?
The number of those products here assembled, together with the
complexity of the infinite detail involved in their production, would
be bewildering were we to plunge into the ocean of particular facts
unequipped with a clear mental grasp of the Basic Facts and their
mutual Economic relations. For illustration, here is a barrel of
potatoes to which the store clerk calls our attention with a view to
delivering it to us in Trade for some of our Money.
Now, what could be simpler at first thought than a barrel of potatoes
as an Economic fact? A farmer has “raised” the potatoes and brought
them to market, where we may have them for their Money price. But what
of the farmer’s “help”? and the plough with which he prepared the
ground? the hoe or more modern implement he used in the processes of
cultivation and of reaping the crop the horses or the motor he ploughed
with? the building in which he stored the crop before marketing it?
the wagon he carried it to market in? the transportation equipment
with which it was carried from a larger market place to this retail
store? the factories in which the barrel was promoted from lumber to
its present condition of usefulness? the factories and stores and
railroads and ships and wagons and tools? the banks and book-keepers
and truckmen? All such factors must be taken into account, with many
more, in their vast and various and intricate relationships, if we
are to know the Economic history and to solve the Economic problems
regarding even so familiar an Artificial Object as a barrel of potatoes
on sale at a retail store.
Every one of those Economic details can be considered intelligently,
readily and accurately, through the medium of the three Basic Facts,
into one or another of which must fall, not only that barrel of
potatoes and all the details of its production, but also the entire
stock of the store, and of all other stores, and every Economic
agency back of them to the very beginning of each productive process
through which they have passed. All Economic details, the familiar
and the unfamiliar, the obvious and the mysterious, the known and
the unknown, generalize with precision into the three Basic Facts of
Economics--Artificial Objects, Natural Resources and Man.
Natural Resources are the source and the indispensable condition at
every stage, from beginning to end, in the production of every kind of
satisfaction for human wants. Man is the active agent at all stages.
Artificial Objects constitute the category into which each result
generalizes at each stage of production. From Economic particulars
we derive knowledge of Economic detail and skill in applying that
knowledge; but only from their correct generalization can we derive
Economic wisdom.
Thinking _about_ the three Basic Facts is necessary to an
understanding of their mutual relations; thinking _from_ them is
necessary to an understanding of the mutual relations of their
constituent parts. Reversely, we must think from Man to Man-power of
numerous kinds, both mental and physical; from Natural Resources to
soil, minerals, air, water, building sites, and so on; from Artificial
Objects to houses, tools, machinery, food, clothing, et cetera.
In another form of statement, the Economic student must know and
understand the comprehensive categories or Basic Facts in order to
grasp the Why of Economic adjustments, the natural relationship of
Economic effects and causes. To understand the How, he must also
know and understand the little facts of Economic specialization,
such as the mutual relations of the details which go to make up
those wholes--the particular facts, for instance, of agriculture or
architecture or engineering or merchandizing or manufacturing or
banking or professional service,--as well as their three comprehensive
classifications or Basic Facts--Man, Natural Resources and Artificial
Objects.
One of the deplorable tendencies in Economic study comes from a
disposition among advanced students to think exclusively within such
narrow fields as banking, manufacturing, transportation, merchandizing,
the cotton trade, the silk industry or agriculture. All trustworthy
Economic thinking must be from fundamentals--from Natural Resources,
Man and Artificial Objects--to the minute details of the respective
Economic specializations. All Economic specializations, to the
uttermost of their Economic minuteness, are subject fundamentally and
in their mutual relations to the natural Economic laws that govern the
inter-relationship of the three Basic Facts--Artificial Objects, Man
and Natural Resources.
That barrel of potatoes in the retail store may serve for an example.
The barrel itself, an Artificial Object, was produced by Man from
antecedent Artificial Objects--staves and hoops. The staves and the
hoops were produced by Man from preceding Artificial Objects--lumber
and iron. The lumber and the iron had come from trees felled and ores
extracted by Man; the trees were Natural Resources, unless cultivated
by Man, in which case they were Artificial Objects produced from and
upon Natural Resources (the earth) and descended from trees which in
their earlier days were themselves Natural Resources. The iron ore
was an Artificial Object produced by Man from Natural Resources known
as ore deposits. So the barrel holding those potatoes at that retail
store proves to be throughout its whole Economic history nothing but a
combination of many kinds of Artificial Objects every one of which has
been produced and all of which have been combined by Man from and upon
and within the Natural Resources of earth and air and light and heat
and electricity and other natural characteristics of the planet that
Man inhabits.
So, also, of the potatoes in the barrel.
And like that barrel and those potatoes, the retail store in which we
find them was itself produced through many Economic specializations and
many stages of industrial progress, each of which, from the extraction
of iron from natural mineral deposits and the taking of timber from
natural forests, was a production by Man of Artificial Objects from
and upon and within the sphere of Natural Resources down to the
placement of that artificial structure, the retail store, upon its
Natural-Resource site at an advantageous point for delivering finished
products to ultimate consumers.
As to that barrel of potatoes and that retail store upon the floor
of which it rests, so of all Economic phenomena. They belong
respectively, according to their respective Economic characteristics
and pursuant to natural law, in one or another of the three categories
or Basic Facts which we have respectively identified as Natural
Resources, Man, and Artificial Objects.
Pursuant to natural law? Certainly. But where do we get any natural
law in Economics? To quote a sarcastic attempt at refutation, “Do we
pick it off the trees?” Yes, some of it we pick off the trees. Who
can intelligently observe the growth and fruitage of a tree without
recognizing operations of natural law? How do trees grow except by
operation of natural law? And except by operation of natural law, how
do men’s bodies grow? Is it enough to answer that the growth of the
body is a problem of physical science, which is subject to natural
law, whereas Economic science contemplates a lawless lot of phenomena?
Or men’s minds, do they unfold without the aid of any natural laws of
human mentality? And what of social or mass mentality--shall we call
it “public opinion” or “herd instinct”?--how does that phenomenon
originate and develop except through processes of natural law?
As with a tree, so with the whole physical universe, inclusive of the
human body. And as with the human body, the physical body and the
social mass, so with the mental equipment. Must not all, for their
very existence and for their development also, be dependent upon and
in all their activities responsive to natural law in one or another of
its jurisdictions--responsive happily or unhappily according to their
degree of conformity or defiance, of devotion or indifference?[3]
[3] For an extended and impressive discussion of the
application of natural law to Economics, see “Natural Law
in Social Life”, by W. R. Lester, M. A., published by
The United Committee for the Taxation of Land Values, 11
Tothill Street, London, S. W. 1, England. For a specific
application to the coal industry, see minority report on
the bituminous coal problem by Warren S. Blauvelt (formerly
of Terre Haute, Ind., latterly of Troy, N. Y.) in the
Proceedings of the National [American] Conference on Social
Work at its fifty-third session in 1926.
Individual activities, whether physical or mental, if that
discrimination be permitted, assuredly work out well or ill as they
harmonize or run counter to natural law. This must be true also of
social activities. The choices made by human beings, and the influences
which affect their choices, operate to produce harmony or discord in
Economic relationships in so far as they harmonize or are in conflict
with natural Economic law.
Economics being the science of a certain range of social activities,
“the science of mankind making a living,” as it has been aptly
called--a science, and not a mere collection of odds and ends of
information--the same conclusions must be true of the science of
Economics as of the physical sciences. Both are scientific in so far
and only in so far as they are within range of natural law.
It is, indeed, a common contention in scholastic Economic circles that
the science of Economics is not governed by natural law as the physical
sciences are. The answer would seem to be conclusive, in so far as that
contention is true, that Economics cannot be a science at all.
Nor are some of the Economics of modern universities strictly
scientific. They disclose a tendency to confuse business customs
with Economic science as if they were identical. This characteristic
of those “business colleges” of a previous generation seems to have
charmed the “scientific” Economists of some of our universities. But
Economic science and business customs or arts are not identical.
Business arts and customs which conflict with natural Economic law
are as certain to culminate in disaster as is the life of a man who,
approaching a wide and deep chasm, attempts to walk across it without
a bridge. Such a bridge cannot be created, it must be produced in
accordance with natural physical law. The same is true of Economic
processes. As physical science cannot create, but can only discover and
apply natural physical laws, neither can Economics create, but must be
content to discover and apply natural Economic laws.
The contention that Economics is not subject to natural law may be
fairly regarded as a lineal descendant of the social doctrine that
there are no natural rights in human relationships, but that human
rights are only conventional. This is the lawless and vicious doctrine
upon which slavery and every other form of social larceny have rested,
from that form which held the Forty Thieves together, to that modern
policy of “get what you can and keep what you get.”
Economists who can offer any other effective process for satisfying
Economic desires than by the production of Artificial Objects from
and upon Natural Resources and in accordance with natural laws,
Economic as well as physical, would thereby kill every inference that
may be correctly drawn from any contention in these pages. But until
that miracle has been performed it behooves all advanced students of
Economics to think, and to think clearly, without active prejudice
or indolent confusion, upon the natural phenomena of the Economic
realm. Give to those phenomena whatever name you please--my name for
them is “natural law”--the fact nevertheless remains, a Basic Fact in
Economics, that no Man nor any number of Men can produce Artificial
Objects to or from any stage of the productive process except from and
upon Natural Resources.
Natural law in Economics is not comparable with “common law” in the
sense of a coordination and sanctioning of social customs. Nor is it
“business law” in the sense of a clutter of commercial customs. And
of course it is not “statutory law” in the sense of commands from
political authorities to obedient citizens. In Economic science, as in
every other science or art worthy the name, natural law uniformly and
inexorably governs the relationship of cause and effect.
Browning struck a key-note when in his “Abt Vogler” he wrote of the
“manifold music” evolved by bidding the organ obey, that--
... “effect proceeds from cause,
Ye know why the forms are fair, ye hear how the tale is told;
It is all triumphant art, _but art in obedience to laws_.”
If any Economic experiment “works” (as a pragmatist might say of
it), why does it work? What other explanation can there be than that
it “works” because it is a correct adaptation of cause to effect in
obedience to mandates of natural Economic law.
Consumption of food is a natural effect of the natural necessity for
food--a natural law. Production of food is a natural effect of the
natural need of food for consumption--a natural law. Resort to Natural
Resources as the sole source and foundation from and upon which to
produce food is a natural effect caused by the natural need for food--a
natural law.
Nor can natural law be limited to the individual man any more than it
is to trees. Associated man also is governed by it. It is the latter
relation that distinguishes it as Economic. From the natural desire
of individual man for production from and upon Natural Resources,
social Trade develops, not arbitrarily but as a natural consequence of
a related natural cause. Let thoughtless students and professors of
Economics who deny natural Economic law--the normal conditions of cause
and effect that govern cooperative mankind in making a living--explain
Economic phenomena, if they can, without reference to Economic cause
and effect, or Economic cause and effect with natural Economic law left
out.
Natural Economic law might, perhaps, be given another and more
accurately descriptive name. Yet its existence and its potency for
good results or bad, according to obedience or indifference to it, are
beyond all possibility of denial by any Economic student who knows
what it means and who, thinking with clarity, speaks with a sense
of responsibility. Its name, “natural law,” is simply a common and
convenient term, whether truly descriptive or not, for indicating the
undeniable fact that in Economics as in every other science, identical
effects invariably proceed from identical causes.
Most plainly and incontestably is that observation true with reference
to the three Basic Facts in Economics. That they are no haphazard
phenomena in their mutual relations or otherwise must be inferred from
universal experience. Artificial Objects for human use are produced
by Man, and only by Man, from and upon and only from and upon Natural
Resources. Man does not create. He produces, which means that he
adapts. And in his processes of adaptation or production, he succeeds
to the degree that he conforms to natural conditions over which he has
no control except by conformity. Call those conditions by whatever name
we may, they have all the characteristics of natural law, or natural
orderliness, over which Man has no other powers of command than by
adaptation of natural means to artificial ends. Natural law would
therefore seem to be the most appropriate name--law beyond the control
of Man except by his adaptation of natural resources to artificial
effects.
Questions of natural law or no natural law in Economics aside, however,
we are confronted by facts which common-sense minds cannot escape. Even
if there be no natural laws of Economics--a contention that would seem
to demand more imagination than thought,--it is none the less a fact
that Artificial Objects never have been produced, are not produced now,
and in all probability never will be produced on our revolving globe,
except by Man and from and upon Natural Resources. Also it is a fact,
whether subject to Natural Law or not, that Man cannot live without
Artificial Objects, nor without Natural Resources from and upon which
to produce and consume those objects. These facts recognized, disputes
over the existence or non-existence of natural law in economics are
mere mental gymnastics which may be ignored without prejudice to the
essentials of any contention in these pages.
The process of human adaptation of Natural Resources to Artificial
effects--or, to use the Economic term, the process of Production,--no
matter how complex, is continuous from original conceptions in the
human mind to completion and delivery of products to ultimate consumers
by the human mind and hand.
FIFTH LESSON
THE PRODUCTIVE PROCESS
The Productive Process in Economics is a complicated sequence of
activities in the bringing forth by Man, from and upon Natural
Resources, of Artificial Objects. It begins with initiatory adaptations
of natural raw materials; it ends with deliveries of finished products
to ultimate consumers, in accordance with their demands.
Finished products may be catalogued in general terms as food, clothing,
dwellings, luxuries and other Artificial Objects which have come into
the possession of ultimate consumers for the satisfaction of their
wants. Drawn from Natural Resources, these products return to Natural
Resources in the course of their consumption, though not necessarily to
the identical places from which they were drawn.
Their substance is indestructible. Man can no more destroy an atom of
the physical universe than he can create one. His powers in Consumption
as in Production are limited to _altering_ Natural Resources in
location and form. The essential Economic difference between Production
and Consumption is that Production alters natural objects so as to
adapt them to the satisfaction of human wants, whereas Consumption
alters Artificial Objects in the process of satisfying those wants.
Production is the drawing forth by Man of Artificial Objects from and
upon Natural Resources; Consumption is the passing back by Man of
Artificial Objects to Natural Resources.
With the processes of Consumption the science of Economics has nothing
to do. Its functions end with delivery to final consumers. Whenever
Consumption is declared to be a phase of Economics, thoughtful
consideration will ascribe the declaration, not to the processes of
Consumption but to the preceding demand for Artificial Objects to
consume.
The human demand for Artificial Objects to consume is the incentive
to the Productive Process. Production, therefore, and demand for
Consumption, are Economic correlatives, Production having Consumption
for its object, demand for Consumption depending upon Production for
satisfaction. Without Production by Man, there could be no Artificial
Objects to consume; without Consumption by Man, there would be no
incentive to produce.