level takes the specific form of a proposal to determine Money
standards by frequent comparisons with the Price level of simple types
of Wealth. Resting nominally upon the Value in Trade of such staples,
this method rests fundamentally upon the Economic fact that Labor, as
the continuous producer of all Wealth, is the real source and regulator
at all times of all Values in the channels of Trade, and that Money is
the measuring rod and its terms the language.
To go farther into this Economic field would necessitate a surface
survey of Economic intricacies, and these pages aim only at clarifying
fundamentals. Having returned from the Basic Facts, upon which all
Economic details rest, to the Money surface with which it began, our
common-sense primer for advanced students is at the end of its task.
SEVENTH LESSON
REVIEW
The science of Economics, having now been traced from its surface to
its three Basic Facts and back to the surface, let us, for the purpose
of bringing the whole subject compactly within its narrowest limits,
retrace our steps briskly but thoughtfully by way of review.
Economic accomplishments are measured by Money standards and expressed
in Money terms. Resting on the surface, those standards and terms
spread over the whole Economic area.
Beneath that surface we first find Trade, for which Money is the medium
or the means of expressing relative values and adjusting balances.
Trade consists essentially in interchanges of commodities, inclusive
of natural resources and of human service. It is not an arbitrary
custom or set of customs, but a phenomenon of natural law through which
artificial objects are produced to completion and final delivery. But
Trade, though lying beneath the Money surface of Economics, is not a
basic fact of that science.
Only by piercing through the Trade surface as well as the Money
surface, can the bottom level of the Basic Facts of Economics be
reached. Those facts consist of distinct categories which comprehend
in generalized forms the myriads of miscellaneous facts with which the
Science of Economics is concerned.
Of those categories or Basic Facts there are in number neither more nor
less than three--Man, Natural Resources, Artificial Objects.
All Artificial Objects are produced by Man from and upon Natural
Resources. The technical term for the activities of Man in that
connection is _Labor_; for Natural Resources, _Land_; and for
Artificial Objects, _Wealth_. In technical Economic terms, therefore,
all Wealth is produced from and upon Land by Labor.
Many colloquial and business subdivisions of those three categories may
be useful provided they be not mixed in their meanings.
One of those subdivisions is Capital, which, in its technical meaning,
is distinctively a part of Wealth produced by Labor from and upon Land.
It is, however, often used loosely to include Land, the technical term
for Natural Resources. Even slaves, and by Economic as well as by
private business classification, have been placed in the subcategory
called Capital, a form of Wealth; and this notwithstanding that
as units of the human factor, slaves belong in the Labor category
of Economics. Although such loose distinctions may be of use in
private business accountings, they are intolerable in the science of
Economics, which, like every other science, demands precision in the
differentiation of terms.
The application of Man’s powers of body and mind to Natural Resources
for the production of Artificial Objects--of Labor to Land for the
production of Wealth--is the Productive Process in Economics. It
involves such subcategories as business enterprise, professional
service, invention, hired-man work--in a word, every grade of
useful activity. These subcategories are developed by industrial
specialization, or, in technical Economic terms, Division of Labor,
which necessitates another subcategory. This is Trade.
Without Trade, products of Labor specialization would remain forever
useless; but through Trade the most minute and incomplete of
those products is brought to its useful place in the aggregate of
Wealth--ploughshares to ploughframes, for instance, or ore to the
steel of the factory, or wallpaper to the interior of the house.
The Productive Process though intricate through specialization and
Trade, is readily observable by generalization into the three major
categories, Labor and Land and Wealth. In observing that Process care
must be taken to distinguish delivery from Distribution. Delivery is
part of the Productive Process. No Wealth is completely produced until
it has been delivered to ultimate consumers. But Distribution has to do
with Wealth apportionment.
In apportionment, or Distribution, there are two major categories,
Wages and Rent, corresponding respectively to the two Production
categories, Labor and Land. A minor Distributive category,
corresponding to the minor category in Production called Capital,
is distinguished as Interest. This term identifies the earnings of
Capital. Inasmuch, however, as Capital is part of Labor-produced
Wealth, Interest must be a subdivision of Labor-earned Wages.
The Wages category in Distribution comprises, fundamentally, all
that part of Labor-produced Wealth which is not allocated by natural
Economic law to Rent for permission to use Land. This allocation
is determined by the greater desirability of some Natural-Resource
locations (Land) over the most desirable that may be had for the
taking--of those at the “Margin of Production” as it is technically
called, the “margin of cultivation” as it was called when agricultural
areas alone were thought of as Land, at the Economic frontier as it may
be most significantly described.
All assignments of Wealth in Distribution being determined by
comparisons of desirability of service (Value measured in terms of
Money), we find ourselves at the close of our brief review back at the
Money surface of Economics where we began our delving expedition down
to the Basic Facts.
As a result of that expedition we know, if we think with clarity and
fidelity, that Economics is the science, not of making Money, but of
Producing and Distributing Artificial Objects from and upon Natural
Resources by Man. The usefulness of our expedition depends upon our
grasp of and fidelity to the generalization of all Economic facts into
those Basic Facts which are respectively distinguished in Economic
terminology as Land, Labor and Wealth.
Questions for Self-Examination
I
1.--Name the three Basic Facts of Economics as described in the
foregoing pages.
2.--Define them as there defined.
3.--In your judgment are there any others? If so, name and define
them.
II
1.--What is Money as defined in the foregoing pages?
2.--How would you define it?
III
1.--What is Trade as defined in the foregoing pages?
2.--How would you define it?
IV
1.--What are the Basic Facts of Economics as in this book explained?
2.--Comment upon that explanation, and give your own.
V
1.--Describe the Productive Process as explained in the foregoing
pages.
2.--Describe it as in your judgment it ought to be described.
VI
1.--Describe the Distributive Process as explained in the foregoing
pages.
2.--Describe it as you think it ought to be described.
VII
1.--Review the Primer briefly but considerately throughout.
FOR THEIR ADVICE, THEIR SUGGESTIONS, THEIR CRITICISM AND THEIR
ASSISTANCE IN OTHER RESPECTS, THE AUTHOR HEREBY EXTENDS GRATEFUL
ACKNOWLEDGMENTS TO GEORGE A. BRIGGS, HARRY GUNNISON BROWN, ANDREW P.
CANNING, STOUGHTON COOLEY, LEWIS JEROME JOHNSON, ALICE THACHER POST,
FREDERICK W. ROMAN, MARY VAN KLEECK, AND JOHN Z. WHITE.
IT IS GRATIFYING TO MAKE RECORD ALSO OF THE FINANCIAL AID CONTRIBUTED
TO THE PUBLICATION OF THIS PRIMER THROUGH A GENEROUS PERSONAL BEQUEST
TO THE AUTHOR FROM THE LATE MRS. MARY E. GARST SMITH OF NORTH
BROOKFIELD, MASS., WITH AN EXPRESSION OF HER HOPE FOR ITS USE ON LINES
WITH WHICH THIS WORK IS IN ACCORD.
Transcriber’s Notes
Punctuation, hyphenation, and spelling were made consistent when a
predominant preference was found in the original book; otherwise they
were not changed.
Simple typographical errors were corrected; unbalanced quotation
marks were remedied when the change was obvious, and otherwise left
unbalanced.