comes from the practical impossibility of drawing a line between return on the investment and return of the investment. I do not think there is so definite a line of demarcation as Mr. Davis holds, except for investments that have been terminated by the distribution of the assets.

For going concerns even modern accounting does not really attempt accurately to define annual profits. Note, for example, the difference in its treatment of unrealized depreciation and unrealized appreciation. Again I submit that where realized depreciation is normally and easily met out of operating expenses and where, with the sanction of law and custom, unrealized depreciation in market value has not been charged to operating expenses, it is by no means a demonstrable fact that this unrealized depreciation has nevertheless been a virtual operating expense. Business policies were not framed with reference to the marketability of capital assets, and were quite properly not so framed.

From Mr. Davis's discussion of the probable actual earnings of public service undertakings in the past I infer that the difference in our views is in large part not so much a matter of logic as of our very different impressions of the degree of success which has attended the average undertaking. I impute no high degree of accuracy to the statistics in the Commissioner of Labor's Report. But I am inclined to give more weight than Mr. Davis does to the explanation offered by the editor of the tables (presumably Mr. G. W. W. Hanger) who must be supposed to have been conversant with the various limitations of the figures. Mr. Davis's alternative explanation may have significance for a few isolated cases, but I do not think that the practice of making improvements out of earnings without charging them to the property account has been so common

among local public service companies as he supposes. It is easy to let one's impression of the general profitableness of such undertakings be derived from a few conspicuously successful examples. Looking at the general run of the cases in the reports of state commissions, one's impression of the facts is not far out of line with that given by the Commissioner of Labor's report. The theory of monopoly price has no bearing upon the matter, for that theory assumes the most important variable - the amount of the investment in fixed capital - as a given quantum.

No rules of rate regulation can be applied without making some exceptions. There are cases where the rigid application of any general principles would have to be somewhat tempered, just as there are cases where obvious extortion in the past might properly be taken into account. But for the most part principles for the valuation of properties which were installed under conditions of risk taking, and sometimes of potential destructive competition, must be general in their application. We can neither penalize past success nor make compensation for past failure. Our rules must be shaped with reference to the normal or most numerous cases. I suspect that it is possible that Mr. Davis might agree with me in upholding Mr. Allison's contention if he shared my view as to the degree in which the absence of depreciation charges has tended to increase the ratio of investment to gross earnings in the case of the average public service company.

ALLYN A. YOUNG.

REVIEWS

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THE ECONOMIC SYNTHESIS

YEARS ago Loria expressed his dissatisfaction with the generalizations which economists presented as scientific laws. He found them " nothing more than more or less perfect abstractions from transitory phenomena," while that which he sought was "the true economic law, immutable, independent of space and time, and therefore filling all the requirements of a scientific law." The present book on the Economic Synthesis,1 which he describes as "the complement and the theoretic crown" of all his earlier work, embodies his attempt to break the bonds which have fettered other writers. The Egyptian statue, rigid in its outlines, and with the hands attached to the knees, was succeeded by the Greek statue, animated and alive." So in the field of economic thought the author believes that beyond the imperfect generalizations of his predecessors there lies "a synthesis scientific and positive in character, at once static and dynamic," and this synthesis he has here endeavored to achieve.

With the author's aim we may have much sympathy. Any one who works in the fields both of economics and history must gain the conviction that, on the one side, the laws of modern economics are partial and very fragmentary statements of the whole truth, while on the other side the facts of history invite generalizations of commanding importance, which promise to give significance to the minor laws. Further, it seems to me that Loria indicates in his introduction the only right way toward a satisfactory interpretation of

1 The Economic Synthesis. the Italian by M. Eden Paul. 368. $3.

A Study of the Laws of Income.

Translated from New York, The Macmillan Company, 1914. Pp. xii,

economic phenomena in their historical development when he presents them not as things technical and apart, but as merely special aspects of a complex whole, and intelligible only in the light of a social theory. The economists may, if they please, rail at the sociologists, but they should recognize that economics is meaningless except as part of a broader social science. So great indeed, is the need of this new science of society, which shall cover things ethical, legal, economic and political, as well as many others, and which shall be neither a collection of "dessicated anthropological anecdotes," to borrow H. G. Wells' description, nor yet a web of vague abstractions, that contributions to it should be heartily encouraged, and should be judged most charitably. This new field is so vast and difficult that pioneers in it must inevitably stray and stumble. Yet the report of every explorer will be of service if it narrates truly what he saw in the undiscovered country, and describes his route accurately, that others may follow it and make it the starting point of fresh investigation. Leaving the metaphor, the scholar who proposes a new theory of social development must be an attentive and impartial observer of fact, and must be logical in his generalization, else he wastes the time of himself and others. Loria appears to me, in his handling both of theory and of history, to fall below a fair standard of professional competence. I shall not attempt to describe or to criticize the book in detail, but shall seek merely to indicate some of the faults which make it not worth the reading.

As Loria's book is devoted to the determination of "The Laws of Income " the reader wants, first of all, to know what the author means by income. A statement on page 29 appears, by its form and emphasis, to be offered as a definition: "the surplus product of coercively associated labor, after there has been subtracted from that product what is required for the redintegration and increase of the subsistence of the laborers and of the technical capital, constitutes income." Disregarding for the present that element of the concept which restricts it to a certain form of organization ("coercive association") the feature which strikes one most

is the division of the social product, of which part only is income. The term income, as used by Loria, departs in its very conception from the conventional idea of a colorless mathematical total; it has a social significance, it suggests the contrast between the beati possidentes and the rest of us. Now let us admit, candidly, that this brings to the forefront a question which has been of the most absorbing interest in all ages. Let us admit further that this question is one which conventional economics has been and always will be incompetent to solve. Sympathize as we may with Loria in his quest, I do not see how any reader of the book can feel that he has done more than to pass the socialists on a false road, on which they have recently been retracing their steps. He fails, as they have done, to distinguish in history any influences which have fixed the returns to laborers at a point capable of precise objective definition. He does not even attempt to develop a theory of population, to supplement the theory of land monopoly which he has presented in earlier works. His definition itself wavers in the face of facts. Subsistence appears first as "required," necessary, "bare"; it" is a precise quantity "; then it is " quasi fixed," it remains unaltered or nearly so "; it "does not of necessity coincide with the strict necessaries of life "; we are asked to consider cases in which subsistence diminishes, and other cases in which it increases until it "at length annexes a certain share of income "; finally, we are told of processes, of the first importance in the workings of the economic system, by which subsistence is "artificially " lowered to keep laborers from the land, and by which, in the conflict between subsistence and income, "in the last resort, the arbiter in the contest is income, and [that] subsistence becomes established at that point which gives the maximum permanent income."

"No more logical demand can possibly be made," writes Loria on one of the early pages of his book," than that we should distinguish clearly between subsistence and income, defining the latter as that part of the net product which remains after subtracting the subsistence of the laborers." The reader, ignorant as yet of the way in which the definition