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Subsequent investigations in the United States have confirmed in a general way the conclusions of Engel, but the correspondence is not exact, as will be seen from Table II (page 119), from the reports of the United States Bureau of Labor, summarizing the expenditure of over two thousand families in 1891 and over eleven thousand in 1903.

A recent careful study of two hundred families in New York gives the following division of expenditures:

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The author of this study comes to the conclusion that a "fair living wage for a workingman's family of average size in New York City should be at least $728 a year, or a steady income of $14.

TABLE II

EXPENDITURES OF AMERICAN FAMILIES INVESTIGATED BY THE
UNITED STATES BUREAU OF LABOR

(From the Seventh [1891] and Eighteenth Annual Reports [1903])

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45.6 48.1 14.1 10.0 15.0 18.7 7.0

.......

.......

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$800 .. $800 or under $900.... $900 or under $1000... $1000 or under $1100. $1100 or under $1200. 30.7 37.7 16.5 14.9 12.2 16.6 $1200 or over... 28.6 36.5 15.7 15.7 12.6 17.4

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$700.. $700 or under

.........

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45.I

7.1 18.3 16.1 46.9 14.4 11.4 15.3 18.6 6.6 6.7 18.6 16.5 6.2 19.1 17.2

43.8 46.2 15.3 12.0 15.2 18.4 6.6

41.2 43.5 15.9 12.9 15.5 18.5 5.9 5.8 21.6 19.4

38.9 41.4 16.3 13.5 15.6 18.1 5.3

5.3 23.9 21.6

5.0 25.5 23.0

38.1 41.4 15.1 13.6 16.1 17.1 5.3

34.3 39.9 16.8 | 14.4 14.9 17.6 4.7

5.0 29.1 23.2

34.7 38.8 17.5 15.1 15.1 17.5 4.5

4.9 28.1 23.7

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41.143.1 15.3 13.0 15.1 18.1

5.9

5.7 22.7 20.1

a week. Making allowance for a larger proportion of surplus than was found in these families, which is necessary to provide adequately for the future, the income should be somewhat larger than this; that is, from $800 to $900 a year." 1

QUESTIONS AND EXERCISES

1. If you had four sacks of corn all alike, could you tell which is the marginal one?

2. If an individual estimates his present wants as 10, 8, 6, 3, 1, and his future wants as equivalent to the present value of 9, 7, o, and if he has $9, and if each want is satisfied with $1, how dollars, an many he save? 3. Give as many expressions as possible that are equivalent to the term "subjective value."

4. Comment on the following: "Doubtless the best thing to do about them (the spendthrifts) is to do nothing - not even to worry about their waste of money. Their waste of money, in fact, is the least silly thing they do, for the money is in constant flux and serves its purpose." World's Work, June, 1906, p. 7597.

5. Comment on the following words of Adam Smith: "Nothing is more useful than water; but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use, but a very great quantity of goods may frequently be had in exchange for it." Wealth of Nations, Book I, Chap. IV.

6. Point out the differences in the tables of consumption statistics quoted in the text.

BÖHM-BAWERK, E. VON.

and 4.

REFERENCES

Positive Theory of Capital, Book III, Chaps. 3

CARVER, T. N. "How Ought Wealth to be Distributed?" Atlantic Monthly, 1906, Vol. 97, p. 727.

DEVINE, E. T. Economics, Chaps. V and VI.

HOBSON, J. A.

JEVONS, H. S.

The Social Problem, Book II, Chap. VII.
Essays in Economics, Chaps. II and III.

KELLEY, F. "Aims and Principles of the Consumers' League." American Journal of Sociology, Vol. V, p. 289.

MARSHALL, ALFRED. Principles of Economics, Book III.

MAYO-SMITH, RICHMOND. Statistics and Economics, Book I, Chap. II. MORE, L. B. Wage-Earners' Budgets.

ROWNTREE, B. S. Poverty, Chaps. VI, VII, and VIII.

SMART, WILLIAM. Introduction to the Theory of Value, Chaps. I to VI.
Eighteenth Annual Report of the United States Bureau of Labor.

1 More, Wage-Earners' Budgets, New York, 1907, pp. 208 and 269.

Production Defined.

PART III

PRODUCTION

CHAPTER IX

PRODUCTION

-Man creates no new matter. Neither the farmer nor the merchant adds one atom to the existing material of the earth. Yet they are both properly called producers because they increase our supply of economic utilities. Production, then, means the creation of economic utilities by the application of man's mental and physical powers to the materials of nature. The act of production can be reduced to the following three operations: (1) changing the form of things, (2) changing their place, and (3) keeping them until such times as they are wanted; in other words, production adds to the materials of nature, form utilities, time utilities, and place utilities. It has seemed to some that the farmer is more truly a producer than the manufacturer, and the manufacturer than the merchant; but such is not at all the case. All of these industrial classes help at some stage in the process of getting the materials of nature ready for consumption. The miner gets iron ore from the ground, the manufacturer transforms it into stoves, the railway company transports them, and the merchant keeps them until they are wanted. One stage is as essential as another if wants for stoves are to be satisfied. It may well happen that the utilities produced by the merchant could be produced with a smaller expenditure of economic force, and that by a better organization of the factors of production saving could be effected; or it may be that at times the merchant has been able to secure a larger return for a given effort than the farmer, but this is no justification whatever for the popular impression that he is not a productive worker.

Factors of Production. It has been customary to speak of three factors of production-nature, labor, and capital. Under nature are included all forces external to man, as the wind, the movement of water, attraction of gravitation, cohesion, etc. Frequently these things furnished by nature are called simply land, because, of what belongs to external nature, it is with land that we have principally to do in political economy.

Labor, as a factor of production, includes human activities of every sort, intellectual as well as physical, which have economic significance. We might better, perhaps, substitute man for labor as the second factor. Labor is supplied by human beings and is different from material goods because it is always connected with a personality. Moral and intellectual qualities increase its productiveness. Temperance, trustworthiness, skill, alertness, quick perception, a comprehensive mental grasp, all these and other qualities belonging to the soul of man are of paramount importance. Man's mere physical strength in itself is a poor thing, being surpassed by that of the lower animals, but man is far more productive, and even as a slave sold for more than the lower animals.

Man can get but little from nature with his unaided hands. The instruments which assist him, as we have seen, are called capital; in other words, capital is every product which is used or held for the purpose of producing or acquiring wealth. By this definition, land is evidently excluded from the category. The nation's capital, then, consists of tools, machinery, business buildings, transportation systems, raw material, etc. We may here again caution the reader against confusing these concrete goods with their value. Capital cannot be looked upon as an independent factor of production, since it is derived from the labor of man applied to nature. This fact has led some persons to say that capital is simply storedup labor, but this overlooks the important element of time required for production with the aid of capital. When we say that to print a book according to present-day methods requires the cooperation of labor and capital, we do not deny that the type-setting machines and printing presses which are used are themselves the product of other kinds of labor. To substitute capital for labor

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