of division of labor, 127; Advantages of division of labor, 128; Effect upon the worker and the product, 129; Territorial division of labor, 131; Productive organization of the American people, 132. CHAPTER X.-BUSINESS ORGANIZATION Nature of business units, 136; The corporation charter, 141; Corporation capital and securities, 143; Overcapitalization, 144; Forms of capitalization, 146; Corporation management, 147; Ad- vantages and social aspects of corporations, 148; Trusts, 150; Meaning and significance of value, 156; The market, 158; Con- ditions of competitive valuation, 159; Supply and demand, 160; Nature of demand, 160; Elasticity of demand, 163; Consumer's surplus, 164; Nature of supply, 165; The determination of price, CHAPTER XII.-VALUE AND PRICE (Continued) Normal value, 170; Different conditions of supply, 172; Con- stant and variable expenses, 174; Joint expenses of production, 177; Surplus of bargaining, 177; Non-reproducible goods, 178; Monopoly value, 179; Retail prices, 179; Public authority and value, 179; Imputed value, 181; Valuation of production goods, The idea of monopoly, 187; Partial monopoly, 191; Classifica- tion and causes, 192; Public and private, 193; Social and natural, 194; Local, national, and international, 196; monopoly price, 197 ; Law of monopoly price, 201; Class price, 202; Monopoly price, high price, 206; Monopolies and distribution of wealth, 208; Public policy toward monopolies, 209; Relation of monopoly to Definitions, 214; Metallic money, 216; Coinage, 217; Seignior- age, 217; The standard of value, 221; Limited coinage, 224; Bimetallism, 225; The gold standard, 234; Government paper money, 234; Colonial and Revolutionary bills of credit, 235; The COPYRIGHT, 1893, BY HUNT & EATON. COPYRIGHT, 1908, BY THE MACMILLAN COMPANY. First published elsewhere. Reprinted May, 1900; July, October, 1901; August, 1903; July, September, 1904; July, 1905; January, August, 1906; July, 1907: April, 1908. New edition, revised and enlarged, September, 1908. 380473 DAVULOUD PIRSVIK, Norwood Press J. S. Cushing Co. -Berwick & Smith Co. Norwood, Mass., U.S.A. PREFACE SINCE the first edition of the Outlines of Economics was published fifteen years ago, there has been considerable progress in economic discussion. In this revision an attempt has been made to include so much of the new thought as seems to have established itself. No chapters remain unaltered, most of them have been entirely rewritten, and some new ones have been added. But the plan of the former edition has been retained. This book differs from the Elementary Principles of Economics, published in 1904 by Ely and Wicker, in that it is a more advanced treatise, and intended primarily for college and university use; whereas the latter, although used in a number of higher institutions, is intended primarily for high schools. Four persons have taken part in this revision, but a free interchange of criticism has, it is hoped, resulted in a unified product. Numerous passages, amounting in the aggregate to many pages, have been printed in smaller type. Such are the passages which, either from their greater difficulty or from their subsidiary character, may best be omitted by a teacher pressed for time. Moreover, for classes in which the time limits are too narrow to permit careful study of the whole text, it may be found expedient to omit Book III, on Public Finance; while, on the other hand, some teachers may wish to take this Book up for independent study. Considerable attention has been given to the questions at the close of each chapter, and an endeavor has been made to frame these so as to require a mastery of principles to answer them. Perusal of the text alone will not enable one to answer them all. In some cases it will be necessary to use the references to literature given at the close of chapters. There are also cases in which the correct answer must be a matter open to differences of opinion. It is hoped and believed that the questions will give rise to fruitful class discussions. The aim of the authors has been to cover the entire field of economics, feeling that in this way they best serve the purposes of those students who are going to carry their studies further as well as those whose systematic school study of economics will end with the present treatise. At certain points in the discussion of distribution, use has been made of the so-called "productivity theory." In order that there may be no misapprehension, it may be well to say here, what is repeated in the text, that in our view this theory has little or no ethical significance, and that its principal value is as an expeditious method of approaching the supply and demand theory, with which it is in complete harmony. When properly handled, it has the pedagogical virtue of leading the student directly to a study of the innumerable forces which condition supply and demand. But to regard the productivity theory as an end, is to mistake the problem for its solution; and to pass from this theory lightly to the immediate solution of those problems which the theory of distribution is designed to explain, is to offer, in place of scientific explanation, a mass of pretentious platitudes. Valuable suggestions have been received from Dr. H. C. Taylor and from Dr. W. H. Price, both of the University of Wisconsin. In conclusion, I wish to express my high appreciation of the work of my friends and colleagues in the revision of this book. RICHARD T. ELY. MADISON, WISCONSIN, CHAPTER I.-THE NATURE AND SCOPE OF ECONOMICS Diversity of economic study, 3; Definition of economics, 4; A social science, 5; Studies man in process of development, 6; Economic laws, 7; Principal divisions of economics, 15. CHAPTER II.-THE CHARACTERISTICS OF THE PRESENT ECONOMIC SYSTEM Human and physical conditions of economic activity, 16; Private enterprise and state activity, 16; Division of labor and exchange, 18; Mutual dependence, 19; Economic classes, 19; Private property, 20; Inheritance, 21; Contract, 21; Vested interests, 22; Freedom, 23; Competition and markets, 24; Coöperation, 26; Monopoly, 26; Custom, 27; Authority and benevolence, 27. CHAPTER III.-THE EVOLUTION OF ECONOMIC SOCIETY Basis of the economic stages, 29; Direct appropriation, 30; Primitive man, 31; Pastoral stage, 32; Agricultural stage, 33; Manorial economy in England, 34; Handicraft stage, 35; Gilds, 35; Domestic system, 36; Agricultural changes, 37; The mercantile system, 37; Patents of monopoly, 38; Industrial stage, 39; Other classifications, 39. CHAPTER IV. -THE EVOLUTION OF ECONOMIC SOCIETY (Continued) England in 1760, 43; Revolt against restrictions, 43; Mechanical inventions, 44; Agricultural changes, 46; Effects of industrial revolution, 47; The factory system, 47; Expansion of markets and industrial specialization, 48; Evils of the transition, 48; Competition and laissez-faire, 49; Reaction against the passive policy, 50; Quality of goods, 50; Protection of labor, 51; Labor organizations, 53; Extension of government enterprise, 54. vii |