COPYRIGHT, 1893, BY HUNT & EATON. COPYRIGHT, 1908 AND 1916, BY THE MACMILLAN COMPANY. First published elsewhere. Reprinted May, 1900; July, October, New edition, revised and enlarged, September, October, 1908; Third edition, revised and enlarged, September, 1916. Reprinted Reprinted with corrections, August, October, 1917. Norwood PresS J. 8. Cushing Co. Berwick & Smith Co. PREFACE THE first edition of the Outlines of Economics, written by Professor Ely, was published in 1893. Four persons coöperated in the preparation of a revised and enlarged edition, which appeared in 1908. This was in many respects a new book, although much matter from the earlier edition was incorporated in it, and although pains were taken to retain the general organization and especially the general point of view of the older volume. The present edition does not differ so much from its predecessor as that differed from the first edition, but it is, nevertheless, the result of a more thoroughgoing revision than is usually given to books of this kind. Some minor changes have been made in the order in which the chapters appear; two chapters have been omitted; and a chapter on labor legislation has been added. No chapter in the book remains unaltered, and the larger part of Books II and III has been virtually rewritten. While the number of different subjects treated has been slightly reduced, the treatment of the more fundamental subjects has been considerably expanded. Each of us has undertaken the revision of a definite portion of the book and, to secure unity, Professor Young has had general editorial supervision of the revision as a whole. Some of the changes are such as are necessary by reason of eight years of progress in industrial life, in legislation, and in economic thought. Other changes are the outgrowth of the experience gained in eight years' use of the book in university and college courses. Among the many persons to whom we are indebted for helpful criticisms and suggestions are Dr. John Cummings, Professor H. J. Davenport, Dr. C. S. Duncan, Professor L. C. Gray, Professor J. E. Le Rossignol, Professor W. C. Mitchell, Professor T. W. Page, Professor F. M. Taylor, Mr. Ray S. Trent, and Professor N. A. Weston. The instructors in charge of the course in elementary economics at the University of Wisconsin have generously coöperated by submitting carefully prepared lists of definite, well-considered, and pointed suggestions for the betterment of the book. We make grateful acknowledgment to Professors T. K. Urdahl, W. I. King, and H. D. Simpson, and to Messrs. Harry Jerome, A. H. Hansen, J. G. McKay, and F. L. Vaughan. THE AUTHORS. SEPTEMBER, 1916. 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; Eco- nomic laws, 7; Relation of economics to other sciences, 11; Prin- cipal divisions of economics, 15. CHAPTER II. — THE CHARACTERISTICS of the Present ECONOMIC SYSTEM Human and physical conditions of economic activity, 17; Private enterprise and state activity, 17; Division of labor and exchange, 19; Economic classes, 21; Private property, 21; Trade-marks, copy- rights, and patents, 23; Inheritance, 24; Contract, 25; Vested in- CHAPTER III.—THE EVOLUTION OF ECONOMIC SOCIETY Basis of the economic stages, 33; Direct appropriation, 34; Primitive man, 35; Pastoral stage, 36; Agricultural stage, 37; Manorial economy in England, 37; Handicraft stage, 39; Gilds, 39; Domestic system, 40; Agricultural changes, 41; The mercan- tile system, 42; Industrial stage, 44; Other classifications, 44. CHAPTER IV. —THE EVOLUTION OF ECONOMIC SOCIETY (Continued) Industrial Revolution, 47; England in 1760, 47; Mechanical in- ventions, 49; Agricultural changes, 50; Effects of industrial revolu- tion, 51; The factory system, 51; Industrial specialization, 2; Evils of the transition, 52; Competition and laissez-faire, 53; Re- action against the passive policy, 54; Quality of goods, 55; Pro- tection of labor, 55; Labor organizations, 57; Extension of govern- CHAPTER V. THE ECONOMIC DEVELOPMENT OF THE UNITED STATES Economic stages in American industrial history, 61; Sectional- ism, 62; Characteristics of the American people, 63; Growth of population, 64; Slavery and the negro problem, 66; Immigration, CHAPTER VI. -THE ECONOMIC DEVELOPMENT OF THE UNITED STATES Mercantilism in America, 79; English colonial policy, 80; American industries in 1776, 81; The Industrial Revolution in America, 81; The development of agriculture, 84; Manufactures, 86; Transportation, 90; The labor movement, 93; State regula- CHAPTER VII. — ELEMENTARY CONCEPTS Motives in economic activity, 103; Utility, 105; Free and eco- Production defined, 116; Production of values, 118; Factors of production, 119; Saving and capital formation, 122; Production and sacrifice, 124; Organization of productive factors, 123; The entrepreneur, 123; Division of labor, 124; Advantages of division of labor, 126; Effects upon the worker, 127; Territorial division of labor, 128; Productive organization of the American people, 129. Consumption defined, 132; Productive and final consumption, 132; Human wants, 133; Law of diminishing utility, 133; Mar- ginal utility, 135; Subjective value, 137; Economic order of con- sumption, 139; Future wants, 140; Consumption and saving, 142; Alleged present consumption of future products, 142; Luxury, 143; Harmful consumption, 144; Statistics of consumption, 144; Con- sumption and sacrifice, 146; Cost of production, expense of produc- |