OUTLINES OF ECONOMICS

CHAPTER I

THE NATURE AND SCOPE OF ECONOMICS

THE most striking characteristics of the great field of knowledge the Outlines of which we attempt to sketch in the present volume are its rich diversity and spacious amplitude. Starting from psychology in its analysis of the human needs which explain or condition wealth, it traverses the entire field of social activities and institutions arising from man's efforts to supply his material needs. It touches on one side the physical sciences from which it borrows some of its most fundamental principles; occupies joint territory at places with politics, ethics, and law, although their respective jurisdictions are in the main distinct; and forms at once the most fertile and most thoroughly developed province of the broad science of human society. Within its borders, if we may continue to compare the scientific possibilities of economics with the natural resources of an opulent territory, opportunity is offered for the exercise of every mental aptitude and every scientific method. The historian's gift is needed to unravel the past and trace the development of the industrial institutions whose presentday problems, in turn, offer indefinite scope for the studies of the more practical student with a taste for administration or business management. For the legal mind there are the subtle problems of property, inheritance, labor legislation, and corporation control; for the mathematically inclined, insurance and modern statistics; for students with practical political interests, the tariff, currency reform, and a score of important problems in which economics and politics are inextricably interwoven; for the philanthropic, unemployment, accident insurance, and a number of social prob

lems growing out of the maladjustments of modern industry. Animating the entire subject, blended of course with the love of truth for truth's sake common to all sciences, is the persistent hope that by systematic study we may eventually abolish the material poverty which deadens and dwarfs the lives of millions of our fellows. Economics is a science, but something more than a science; a science shot through with the infinite variety of human life, calling not only for systematic, ordered thinking, but for human sympathy, imagination, and in an unusual degree for the saving grace of common sense.

To define such a subject adequately in a few sentences is manifestly impossible. It is frequently said that economics treats of man's efforts to earn a living, and this definition is not inaccurate if by "man" we understand "mankind," and if we fully appreciate that the individual's efforts to turn an honest penny's profit receive but little attention in comparison with the community's efforts to feed, clothe, and shelter itself. Satisfaction of social need, and not individual profit, is the objective point of the science. So, similarly, economics has been characterized as the philosophy of human industry; and this description is illuminating provided we interpret "industry" broadly enough. Even the old traditional definition, that economics is the science of wealth, is true enough if we clearly understand that there can be no wealth without man, and that the science which deals with wealth, so far from being a "gospel of mammon," necessarily begins and ends in the study of man. As we prefer to define it, however, economics is the science which treats of those social phenomena that are due to the wealth-getting and wealth-using activities of man.

Economics treats of Man. The supreme importance of man in the study of wealth has not always been appreciated by those who have expounded the science. Too often they have considered man simply as a producer of wealth, the one "by whom" the necessaries, conveniences, and luxuries of life are created, whereas the infinitely greater truth is that man is the one "for whom" they are all produced. Of course no one denies this truth, but one might almost as well deny it as to leave it out of account. The result of such neglect is that men devise with great skill

rules by which man may be made the best possible manufacturing machine. It sometimes quite escapes the notice of these persons that in making man the best possible manufacturing machine they may make him a very poor sort of a man; that in teaching him to supply his wants very bountifully they may prevent his developing and correcting those same wants. They forget that there are two kinds of poverty s of poverty-one a lack of goods for the higher wants, the other a lack of wants for the higher goods. To become rich in goods while losing at the same time the power to profit by them is unfortunately one of the commonest retrogressions in human experience. We do not mean that the whole problem of human development is the subject of economics, but simply that manhood, rounded human development, is the goal of all social sciences, and none must consider their subject so narrowly as to exclude that object.

Another common mistake has been to regard as of chief importance the economic activities of one particular class, especially the employer. Other men were treated simply as "a factor in production." An English writer speaks of dear labor as one of the chief obstacles to England's economic prosperity. Could anything be more utterly an oversight of general human wellbeing? Dear labor should be the very goal of England's economic effort, for that means abundant supply of the wants of the great mass of her people; and the fact that labor is dear, so far from being an obstacle to prosperity, is the very proof and substance of that prosperity. A glance at history indicates that men have made these mistakes not only in theory but in practice. Industries have been developed to majestic proportions while man was sinking into deeper degradation; wealth has grown at the expense of that human weal in whose service it won its

name.

Economics treats of Man in Society. This is one of those truisms which only history can make real to us. As we pass from the savage and cannibal, up through all the stages of development, we find an ever-increasing interdependence among men. Man is least dependent when he wants least, cares least, has least, knows least, and is least. With every betterment of condition and char

acter he is more dependent than before, more dependent and yet more free. The beginnings of barter are a confession of mutual need; the coining of money is a declaration of dependence to all men. We look with pride upon a century of progress, but that progress has consisted in little else than a growth of dependence, an ever-increasing departure from that rude kind of literal selfhelp in which each one does everything for himself. Our fathers drew water, each for himself, in "the moss-covered bucket," while our mothers dipped candles for the evening's light. If one was negligent, the rest did not suffer. To-day a network of pipes radiate from a common center to enter a thousand households. An engineer makes a blunder at the station, and thousands are in darkness or drought. Progress is a passage from independence to dependence, from distrust to confidence, from hostility to amity, from helplessness to helpfulness, while the great law of social solidarity gains ever-increasing importance. Our science, then, is interested primarily in man in his relations to others, and not in man by himself. Moreover, as a science which studies the present in order that it may predict and prepare for the future, and discovering that interdependence is the law of progress, it must not hesitate to shape its principles with reference to a solidarity which shall grow more rather than less, stronger rather than weaker.

Economics treats of Man as in Process of Development. - Few truths are more easily admitted or more persistently ignored than that of change in human life and condition. History makes it real. Man now wanders about by force of necessity and age-long habit, now starves rather than be moved from his home. Land is now free to all, now parceled out with well-nigh absolute right of individual possession. The seemingly eternal features of the social structure are gone in a few generations. Nothing so invalidates theories, laws, general principles, institutions, and enterprises as this great law of change of which we seldom take full account. Take, for instance, bequests. Nothing is commoner than for a man to leave a legacy under specified and detailed regulations, binding for all time. One leaves money to endow a religious service in a language which in a few generations no one

understands; another founds a college to teach certain doctrines which in a century no one believes; and so on indefinitely. These and a thousand other laborious efforts of statesman, warrior, or philosopher quite lose their worth for the future because their authors assumed that the future would be like their present. Even the wages system and the division between capital and labor which seem rooted in the constitution of society are scarcely two centuries old as a general system. One must never forget in the study of economics that the phenomena with which it deals are pervaded by the spirit of life, moving forward or backward, progressing or decaying, under those influences which control the rise and fall of social institutions. The science is biological rather than mechanical.

The Laws with which Economics Deals. The evolutionary character and complexity of economic phenomena, which account for much of the charm of the subject, endow it also with unusual difficulties. Conclusions true for one generation are invalid in the next. Terms and definitions appropriate to one stage of industry are misleading in a succeeding stage. Generalizations valid for one nation and government are inapplicable to another. Even those laws or uniformities which the science prizes as the finest product of its research are but statements of probabilities - declarations of what is most likely to occur for the mass of men in the long run under certain specified circumstances.

In no department of knowledge, consequently, is there greater need of temperate statement and of that humility of mind which is the surest safeguard against bigotry and dogmatism. No system of economics is applicable unchanged to all times and all places: the premises of the arguments change; the ingredients of nearly every problem present themselves in different proportions; and the conditions of almost every question vary from country to country and from generation to generation. The student must not expect rules of thumb by which he can decide offhand the economic problems of the particular city or country district in which he is for the moment interested. No general treatise on economics can authoritatively decide the practical problems of particular times and places; although the economist, before all other students, is forced to deal with practical problems. What such a treatise can do is to point out mistakes of logic common in the current discussions of economic questions, call attention to obscure factors sometimes of great importance - which the practical man is likely to overlook,