of his wheat by a discriminating rate, and again government interferes in his behalf. But manifold and important as are the regulations of the government, State activity seems very much restricted when we reflect that it might extend over the entire industrial field. To-day the distinctive characteristic of our economic life is private, not public, enterprise.

Division of Labor and Exchange. It is commonly taken for granted that every man should prepare himself for some special occupation, that one should plow while another builds or sings. Hardly any civilization seems possible without some industrial specialization, but our own age is peculiar on account of the extent to which this has been carried. The introduction of machinery and the development of large-scale production have split up so minutely the work of men that the products which they turn out are not only not of immediate use to themselves in most cases, but they are also useless to any one else until combined with the results of other men's labor, often performed years before or afterwards. It is a long and complicated process from the man who mines the ore which is to reappear in a steel plow, to the man who bakes the bread. The effects of this specialization of employment are far-reaching:

(1) It implies the exchange of goods. If we produce things we do not need, we must find some one else who does want them and some one who has the things we desire. Money, banks, and transportation agencies could largely be dispensed with if each family produced for itself alone. There would be none of the complex problems that center about the question of how much each of us is to receive in exchange for his services. One of the striking characteristics of this process of exchange is the great extent to which it is automatic. There is no government official whose business it is to discover how much of each commodity will be needed, and to direct that that amount shall be produced.1 Men are legally allowed to engage in almost any undertaking that attracts them, and yet we take it for granted that somehow things. will get produced in the proper proportions. A hundred men are

1 The government does help, however, in collecting and publishing information, as in the case of crop reports.

set to work in a factory making nothing but hats, many more than they or their friends can use, but the manager has faith that heads will be found to wear them all. Farmers confidently proceed to raise wheat, never troubling themselves about the grinding and baking. Neither workmen nor employers in general know why wages are as they are. Men lend money or goods, now for one price, now for another, but few know why they demand interest or why the rate changes. These processes go on visibly before us, but the governing laws are hidden except to the careful investigator. In this respect they are like the laws of physiology. We eat and digest our food, but how many people know how or why digestion takes place? It is easy, however, to overemphasize this idea, for a great deal of our economic activity is conscious and volitional. When we decide to make a law or levy a tax, we do it consciously, considering arguments, and finally will the thing in question. Further, in the large business consolidations, much knowledge regarding the course of trade is obtained directly through special agents or reports and is made the basis of conscious action.

(2) Specialization of work and exchange of goods just referred to, necessarily implies mutual dependence. Instead of a number of distinct, self-sufficient units, we have a coherent society where one individual relies upon many others to complete his own onesided economic activity. A strike of the street car employees, or of the teamsters, or the destruction of an electric lighting plant, would each send a shock of inconvenience through a community. A prolonged railway strike would be felt as a national misfortune. Indeed, this interdependence is international in its scope. England relies on other nations to send her food in exchange for her manufactured products, and many a German workman would be in distress if there should be a sudden failure in our cotton crop.

Economic Classes. In part, also, the specialization of work is responsible for the division of society into classes, but only in part. The difference in the work of the carpenter, machinist, or railway brakeman does not result in the formation of classes of a higher and lower rank. On the other hand, the professional brain worker enjoys some social esteem that does not fall to the lot of

the manual worker. But doubtless the most important basis of social classification is the possession of wealth. The power to spend freely, while not the only test, is to-day the most widely recognized test of social status, regret it as we may.

Private Property. We proceed now to examine the foundation stones of this system of private enterprise. Private property is the most important of these.

The leading English writers of economic treatises have usually taken the institution of private property as something to be assumed as a starting point in their discussions. John Stuart Mill, indeed, made an excellent beginning in the discussion of property and inheritance in his Principles of Political Economy, but other English writers have not generally followed up his lead. It is to the merit of the German writers that they have critically examined these fundamental institutions in their economic bearings. The work of Professor Adolph Wagner may be mentioned especially in this connection.

For our present purpose we may define private property as the exclusive control over valuable things by private persons. It is to be distinguished from mere possession. The possessor has the use of the thing for the time being, but unless he is at the same time the owner, he is dependent upon the will of another for the use of it. Ownership implies the right of excluding other persons from the enjoyment of a thing. The exclusive right must be recognized and guaranteed effectively by third parties. If I defend my exclusive right of control over some valuable thing against your claim simply by the strength of my right arm, I have not thereby established the right of private property. My exclusive right of control must be recognized by others and must be maintained by them. Over against private property we have public property, and there are some things, such as air, which fall in neither of these categories. The sphere of private property at present includes, not only food, clothes, and other things of personal use, but it also includes the instruments of production – land, buildings, and machinery. In the most important productive processes the tools are in general not owned by the persons who use them. Hence our present wage system.

It may be said that property is the chief seat of social authority. As property carries with it the exclusive right to control things, others may have

If

access to these things only on conditions named by their owners. we look about us, we find men organized and acting together under direction for purposes of production. In a factory we find an organization of men like that of an army. We discover men moving here and there and performing arduous tasks in obedience to command. If we examine the nature of the authority which some thus exercise over others, we shall find that it resides in property. The law of the land to some extent establishes the authority of man over man; but where one man obeys another because the law in so many words tells him to do so, we find a hundred men obeying others because these others have the authority which resides in exclusive control over valuable things. Indirectly this latter sort of authority rests More back upon the laws in so far as these are responsible for the establishment of PPAP property. But the chief seat of authority in society is based only indirectly upon the government; it rests immediately upon private property. Inheritance. Inheritance is often regarded as a necessary part of the right of private property, and it is true that the entire abolition of the right of inheritance would result in a great enlargement of the public sphere of property at the expense of the private sphere, unless gifts were made to accomplish the same object as the system of inheritance. But strictly speaking, we have here to do with two rights. Private property is an exclusive right of control, whereas inheritance is concerned with the transmission of this right from one generation to another.

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As in the case of private property itself, the right of inheritance is not recognized to-day as an absolute one. Detailed regulations exist on our statute books regarding the descent of property where no will is made, and also regarding the making of wills, and there is an increasing tendency to limit the right of inheritance by taxation. Some features of the present law of inheritance well illustrate the tendency of institutions to persist after the conditions that gave rise to them have disappeared. The recognition which we give to the claims of very distant relatives to a share in an estate where there are no near relatives, and where no will has been made, had its origin at a time when blood relationship played a much more important part in society than it does at present. Contract. Scarcely second to the right of private property is the right of contract, for the maintenance of which we are equally dependent on the State. Some sort of contract lies at the basis of all associated activity. To secure the condition of such activity,

+ Trade Minks COPYRIGHE

it is necessary, first, that men should be allowed to bind themselves; and second, that they should be compelled to respect the agreement thus entered into. The entrance into a valid contract is ordinarily voluntary, but once entered into with due formality, the State will use its superior power to enforce it. To the anarchistic mind this seems oppressive, and it must be admitted that a state of society is conceivable in which the element of force would be removed from the idea of contract, but something else 14 would have to be substituted to make the keeping of agreements the general rule. There are doubtless many people living to-day with whom the feeling of honor or fear of social disapprobation would be sufficient for the enforcement of contracts, just as these persons might not need the threat of a jail sentence to keep them from stealing.

The economic ties which hold men together in industrial society on their legal side are very generally contracts. The organization of an industrial corporation implies many contracts. Our property is acquired very largely through contract, and through contract we determine the conditions under which we do our work, such as the length of the working day. The continuity of our economic life rests upon contracts, which bind together past, present, and future. Still, all that we have by no means comes to us through contract. "Contract" does not exhaust the significance of parentage, home, and education, and much wealth changes hands through gifts and inheritance.

Vested Interests.1 A few words should be said about vested interests. Vested interests may be defined as pecuniary interests which are legally recognized to be such that they cannot be impaired by public action without indemnification. Vested interests generally arise through property and contract. Outside of property and contract, however, there may be vested interests. Leeds was compelled by a feudal arrangement to grind its corn, grain, and meal at the lord's mill till well on in the last century, and finally had to pay £13,000 to terminate this obligation. When Prussia bought the railways, the railway presidents were indemnified for the loss of their positions by large payments; in other words, their offices were looked upon as vested interests. England is the classic land of vested interests. An office in the army was until recently looked upon as such, and so was an

"The term "vested rights" is also used.