Principles of Economics

Man as Producer-Qualities Influencing His Efficiency-Conditions
Favorable to Health and Strength-Intelligence and Judgment
-Ambition, Energy and Perseverance-Imagination, Mechan-
ical Ingenuity and Technical Knowledge-Tendency of Evo-
lution-Capitalistic Production-Its Advantages-Capital
Goods and Capital-Fixed and Circulating Capital Goods-
Mobility of Capital Goods-Money-Fixed and Specialized
Capital Increasing-Labor Also Subject to Law of Diminish-
ing Returns-Also Capital-Law of Diminishing Returns Gen-
eralized-Methods of Acquiring Capital-Saving and Investing
-Borrowing and Investing-Borrowing from Banks-Borrow-
ing Not Always for Investment-Saving and Waiting Necessary

to Existence of Capital-Economic Cause of Interest Capital

Goods the Things Saved-Buying Stocks and Bonds Does Not

Add to Capital-Kinds of Capital Goods-Land and Capital-

Personal Qualities Not Capital-Reasons for Describing Deal-

ers' Stocks as Capital-Money-Progress in Capitalistic Pro-

duction: Middle Ages-Growth of Commerce-Influence of

Industrial Revolution-Conclusion-References for Collateral

Reading

CHAPTER X

PRODUCTION: COOPERATION AND BUSINESS

ORGANIZATION

Coöperation-Varieties of Coöperation-Importance of Growth of

Markets-Influence of Improved Means of Transportation-

Qualities Necessary to Effective Coöperation: Honesty-

Steadiness-Spirit of Conciliation-Obedience These Qualities

Fostered by Coöperation Itself—Advantages of Coöperation-

Disadvantages of Coöperation-Other Considerations-Statis-

tical Evidence of Benefits from Coöperation-Business Or-

ganization-The Enterpriser-Forms of Business, Organization:

The Single Enterpriser-The Partnership-The Corporation-

Advantages of Corporations-Their Disadvantages-Diffused

Responsibility-Abuse of Borrowing Power-Political Cor-

ruption-Dependence of Corporations for Success on Single

Individuals-Large v. Small Scale Production-Advantages

of Large Scale Production: Division of Labor-Equipment of

Capital Better Employed-Especially in Transporting In-

dustries-Economy in Buying Supplies-Saving Through By-

products-Can Spend More on Experiments-Classification of

Business-The Representative Firm-References for Collateral

PAGE

PRODUCTION AND DISTRIBUTION

Relation Between Production and Distribution-Definition of

Net Product Of Money Income Of Real Income-Distribu-

tion from Viewpoint of Enterpriser-Definition of Wages-of-

Management-The Other Shares: Rent-Wages-Interest-

Taxes-Business Man's Explanation of These Shares-Why

Economist Must Go Further-Explanation of Wages-of-Man-

agement Included in Explanation of Wages-Distribution

Concerned with the Money Income Increasing Net Product

Normally Increases Money Income-Relation Between Money

Income, Real Income and Net Product-Services of Consumers'

Goods Part of Real Income-Real Incomes Drawn from

Capital Rather than Directly from Net Product-Confusion

Caused by Constant Changes-Assumption of State of Normal

Equilibrium-Net Product and Real Income Interchangeable-

Correspondence to Actual State-Purpose of Assumption-

Arithmetical Illustration-Assumptions Made-Conclusions

from the Example-Comparison with Actual Conditions-

Relation Between Net Product, Money Income and Real In-

come Graphic Illustration-Explanation-Complications in

Actual Industrial Society-Importance of Prices-Influence

of Marginal Buyers-Influence of Expenses of Production-

Representative Firms and Normal Prices-The Shares in

Distribution-Competitive and Monopoly Profits-The Law of

Competitive Distribution-References for Collateral Reading 170

CHAPTER XII

DISTRIBUTION: COMPETITIVE PROFITS

Cause of Competitive Profits-The Power of Substitution-Defini-

tion of Competitive Profits-Their Causes: Fluctuations in

Prices Means of Limiting Fluctuations-Dealings in Futures

-Illustrated by Reference to Wheat-Service of Speculators-

Speculation v. Gambling-General Price Movements-Effect

of Rising Prices-Of Falling Prices-Profits from Inventions

-Profits from Improved Methods-Profits and Losses from

Changing Natural Conditions-Profits from New Land-

Profits from Changing Rents, Wages and Interest-Conclu-

sion-References for Collateral Reading

CHAPTER XIII

DISTRIBUTION: MONOPOLY PROFITS

. 198

Definition of Monopoly-Contrast with Differential Advantages-

Kinds of Monopolies-Importance of Monopolies-Limitations

on Monopoly Power-Power of Substitution-Competition-

Legal Interference-Conclusion-Law of Monopoly Price-

Complications-Summary-Methods of Concealing Monopoly

Profits-Inflated Salaries and Other Expenses-Stock Water-

ing-Funded Incomes-Earned v. Unearned Incomes-Mo-

nopolies Not Always Disadvantageous-Influence of Monopoly

Profits on Other Shares-Practical Phases of Monopoly

Problem Treated in Later Chapters-References for Collateral

Contrast Between Profits and Other Shares-Definition of Rent-

Problems Connected with Rent-The Source of Rent-The

Principal Grades of Land Distinguished-Store Sites-Resi-

dence Sites-Plots Devoted to Truck Farming-Farm Land

Proper-Grazing Land-Fertility as Important as Situation

to Rent-The Demand for Land of Different Grades-The

Calculation of Rent-Summary of Explanation-Other Causes

of Rent-The Rent of Sources of Water Power-The Rent

of Mines-Apparent Exceptions to the Law of Rent-Exist-

ence of Several No-rent Margins-The Rotation of Crops-

Average Return Basis for Calculating Rent-Land Fit for

One Use Only May Command High Rent-Other Complica-

tions-Investments of Capital in Land and Rent-The Capi-

talization of Rent-Summary of Theory of Rent: Its Cause-

Includes a Marginal as well as a Differential Element-The

Intensive Margin-A Surplus Income-When There Is No

Rent-Law of Diminishing Returns-Permanent Improvements

-Rent and Price of Land-Commercial Not Always Same

as Economic Rent-The Métayer System-Rent of Buildings

and Ground Rent-Importance of Rent-References for Col-

Definition of Wages-Differences in Rates of Wages Due to Un-

equal Capacities of Workmen-Differences Gaged in Same

Way as in Case of Rent-Relation Among Different Groups

-Tendency Toward One Uniform Rate of Wages-Different

Grades Overlap-Some Workmen Below the Margin in Their

Group-Individual's Efficiency Depends on Right Choice of

Occupation-Unequal Opportunities of Workers-Number of

Grades Very Large in Practice-Higher Wages Measured

from Marginal Wages-The Rate of Wages Depends on Rela-

tion Between Demand and Supply-Differences in Wages

Perpetuated by Immobility of Workers-Efficiency and Time

Wages Contrasted-Other Causes of Differences in Wages:

Differences in Cost of Living-Expense of Learning Trade-

Ease or Difficulty of Work-Hazard Involved Chance of Suc-

cess or Failure-Social Esteem-Regularity of Employment
-Chance for Promotion-Finally Men Unlike-Influence of

Heredity in Dispute-Influence of Habit, Custom and Edu-

cation-Differences in Standards of Living Perpetuate Differ-

ences in Wages: Definition of Standard of Living-Educational

Opportunities of Children of the Well-to-do and of Manual

Laborers Contrasted-Reasons Why More Is Not Invested

in Education-Necessity for Free Public Education-Con-

clusion-The Determination of Marginal Wages-References

for Collateral Reading

244

CHAPTER XVI

DISTRIBUTION: INTEREST

Definition of Interest-Nature of Problem-Preliminary Explana-

tion-Interest on Bank Loans a Derived Form-The Source

of Interest the Productiveness of Capital-Summary State-

ment of Explanation-Interest Paid for Use of Capital-

Points Requiring Special Emphasis The Replacement Fund

Gives Mobility to Capital Embodied in Capital Goods-Com-

petition Tends to Eliminate Differences in Rates of Interest

-Differences Among Different Branches of Production-

Causes of Differences in Rates-Monopoly-Interest on Per-
manent Improvements-Specialized Forms of Capital Lack
Mobility-Differences in Risk of Loss-Differences Among Dif-
ferent Sections-Differences in Rates of Interest Less Marked
than Differences in Wages-Assumptions Made to Simplify
Discussion-Monopolies Not Considered-Rent Already Ex-
plained-Circumstances Determining Amount of Joint Share-
The Influence of Enterprisers-Qualities and Quantities of

CONTENTS

Workmen and Capital Goods Important-Both Wages and

Interest High in the United States-The Law of Competitive

Distribution-Workmen and Capital Goods Compete as well

as Coöperate This Competition Leads to Comparisons and

Substitutions by Which Wage and Interest Rates Are Deter-

mined-Law Restated-The Law of Competitive Distribution

Illustrated-Correspondence with Actual Industrial Society

-References for Collateral Reading

CHAPTER XVII

VALUE, PRICE AND DISTRIBUTION

xiii