Chapter L: F. P

The Basic Facts of Economics

A COMMON-SENSE PRIMER FOR ADVANCED STUDENTS

FIRST LESSON

ECONOMICS

On the surface, Economics appears to be the science of making money.

This appearance is due, however, to a careless recognition and erroneous application of the fact that Economic accomplishments are measured by money standards and expressed in money terms.

When, for example, a builder builds, he builds to make money. Money measures the Economic extent of what he is doing, and money terms express its Economic desirability. They also express and measure his motive, which is the compensation he can command in the currents of trade.

A merchant makes money when he manages a profitable business.

So does a manufacturer.

Farmers make money when they sell their produce profitably. Nor only when they sell it, but also while they cultivate it; for every day’s growth adds to the money measurement of a crop.

Wage-workers by the day, the week or month, and salary-workers by the year, also workers on commission or for percentages or for profits, make more or less money as working opportunities are more or less plentiful, and wages or salaries or percentage totals and profit totals are consequently higher or lower.

Engineers, lawyers, physicians, architects, dentists, clergymen, teachers--all professional workers,--make money to the extent of the marketability of the services they offer.

And investors, do they not invest by money measurements and in money terms for the purpose of obtaining Economic incomes measured by money and expressed in terms of money?

Manifestly, the immediate object of everybody’s activity in the field of Economics is to make money.

Does one desire food? By making money he gets food. Does one desire clothing? He gets it by making money. Does he wish for housing, furnishings, automobiles, railway or steamboat transportation, necessaries of any kind, luxuries of whatever variety, household service, professional service, legislative or judicial service, mechanical service, mercantile service, clerical service? By making money he gets them. Does one wish for slaves? If slavery be an institution of his time and place, he may have slaves by purchases with the money he makes. Should he be a slave himself, he may purchase his freedom with money if he can get it. Does land-ownership appeal to one? Let him make money and he can buy land. Whatever object the Economic field may offer for the satisfaction of human desires, that object is attainable by making money. In no other way can it be attained through Economic processes.

If gifts be cited as exceptions let the fact be noted that giving is not an Economic process. It lacks the element of exchange or trade. So, too, of theft in any of its forms. In genuine Economics there must be two gainers in every trade. There is no such science as Economics of the Forty Thieves variety.

Even in such seeming exceptions to the Economic importance of money as are offered by barter, in which no money passes and no money accounting is made, comparisons of the objects thus directly exchanged are nevertheless contemplated by the exchangers in terms of money. The owner of a horse that might sell for two hundred dollars, would not barter it for a horse that could sell for only one hundred--not unless he got “boot” enough to even up the money difference to his satisfaction. Nor would the boy with a two-dollar penknife “swap even” for a one-dollar jackknife. It is only when the two horses or the two knives seem to their respective owners to be approximately equal by money measurement that an “even swap” is conceivable.

Another seeming exception to the money-making characteristic of Economics depends upon individual isolation. That isolated individuals may gather food and improvise shelter and clothing without thinking of them in terms of money, is true enough; but the activities of persons thus isolated are not Economic exceptions, for the science of Economics is a social science. Although some Economic phases or phenomena may be picturesquely and aptly illustrated by reference to the experience, actual or imaginary, of isolated individuals like Robinson Crusoe on his island, states of human isolation are outside the limits of Economics.

Inasmuch, then, as the object of the human factor in the science of Economics is to make money, and as there can be no science of Economics without the human factor, Economics is comprehensively and accurately definable, on the surface, as the science of making money.

But making money in the Economic sense must be distinguished from narrower uses of the phrase. To manufacture coins legitimately, as at a mint, is to “make money,” but only in one Economic particular--only in the narrow mechanical sense in which weaving cloth is “making cloth.” Like weaving cloth, it is but an item in the multitudinous phenomena of that money-making which superficially defines the science of Economics. The same observation is applicable to the occupations of engraving and of printing paper currency legitimately.

Illegitimate makings of either paper currency or coin, like all other forms of forgery, are not in any sense making money within the purview of Economic science. They are varieties of theft, and Economic science excludes theft of every kind, even legal kinds, such as slavery. This exclusion is not for moral reasons, it may be well to interject for the benefit of such advanced students of Economics as recoil from mixing moral principles with Economic science. It is due to the fact that exchange, or trade--an essential element in Economics,--is in theft utterly lacking.

In the Economic sense, making money is making it for all concerned in any particular process, and not for one or more of the parties at the expense of the others. No art of getting something for nothing can be within the scope of Economic science. One-sided methods of making money, whether frankly labeled “theft” or “gambling,” or shrewdly disguised in spurious business ethics, are alien to Economic money-making. Within the domain of Economics no money-making transaction belongs unless it involves the making of money by all parties to the transaction.

To make money in that mutual sense is to augment the supply or the serviceableness of whatever commodities money terms may measure and express, and of the portions or shares of all who contribute to the augmentation.

In phrasing more complete than that of “making money,” Economics is the science of making money by earning it. Getting money without earning it is related to Economics only in a science-disturbing sense. It disturbs the normal Economic relations of effect to cause in the production and dissemination of humanly desirable objects. To realize the truth of that statement, the student need only momentarily conceive of theft as universal. Since universal theft as an Economic phenomenon would be utterly destructive of normal Economic relationships, of beneficial effects from normal causes, so must theft to any extent operate destructively to that extent. The only thinkable relation of theft to Economics is analogous to the relation of murder to the human race. That Economic study may comprise considerations of how to exclude stealing from Economic customs, does not go to prove that stealing is a factor in Economic science. It goes no farther than to prove that stealing may become an Economic parasite.

Even as a parasite, stealing could hardly have wormed its way to the Economic border line, much less across it, but for a disposition among advanced students to confuse normal Economic phenomena with arbitrary business customs.

“Business” might indeed be the nearest approach to a synonym for “Economics.” It would be an exact synonym but for one variation. Whereas Economics relates to a comprehensive social organism which (notwithstanding “scientific” contentions to the contrary) is subject to natural laws of human association (sequences of cause and effect), Business is but a limited collection of individual interests or private organizations that are influenced and largely governed by arbitrary customs. These customs may or may not be in harmony with the normal relations of cause and effect in Economics. And as to each particular business, it is operated, as accountants frankly admit, only “for the benefit of its proprietor.”[1]

[1] The quotation is from “Modern Business”, by Thomas W.
Mitchell, Ph. D. New York: Alexander Hamilton Institute.
1918–1919.

In some of its vulgar connotations Business might very well answer to the insolent definition that it consists in the adventures of sprightly gentlemen trying to sell nothing for something to other sprightly gentlemen who are trying to buy something for nothing. In so far, however, as that definition may be appropriate, it applies only to business abuses, not to Business as a possible synonym for Economics. It defines Business only as theft might define morality.

To be a closer synonym for Economics, Business must deserve a definition relating its customs to natural Economic law (a subject to be considered in a later Lesson) and extending its functions more completely to universal mutual service. Moreover, its definition must widen the Business concept so as to include all kinds of such service. Business can no more exclude from its realm particular Business specialties, though that be customary, than it can include the operations of “confidence men,” as it is sometimes supposed to do. Its functions are not limited to commerce, nor to banking, nor to any other of those Business specialties to which careless speech, and sometimes snobbish thought, tend to narrow the meaning of the word.

Business is that function of social life which includes all serviceable specialties. Such terms as “commercial,” “mercantile,” “industrial,” “agriculture,” “labor,” “the professions,” and so on, denominate specializations or sections or subsidiary departments of Business, not Business as a whole. They are useful for subclassification; but, like all subclassifications, whether in Economics or in any other science, they are misleading when perverted into general terms for primary or fundamental or comprehensive categories. The term Business, like the term Economics, should include them all. Every kind of service necessitates busy-ness; and serviceable busy-ness, what is that but Business?

Considered comprehensively, then, and excluding parasitical adhesions, Business might be, as some advanced students of Economic phenomena suppose it to be, another name for Economics. In the scholastic sense, Economics is the more orthodox term; in the practical sense Business could better express the idea. Both terms might have practically the same meaning if considerately used. Honest Business, inclusive of all serviceable activities--service for service, to adopt a phrase in definition of Business--would be identical with Economics. Either, like the other, may be described superficially as the process of the science of making money.

Quite consistently with the foregoing survey, Economics has been described as the science of “mankind making a living.” This definition, too, excludes the solitary life by limiting Economic science to cooperative mankind--in other words, to Economic association. It, too, identifies Economics and legitimate Business; for only through legitimate Business activities can cooperative mankind make a living. It, too, excludes theft in all its forms and guises; for so much of a living as some may make by any kind of theft, others must lose as victims of theft. It, too, brings Economics on the surface and Business on the surface within the definition of “the science of making money;” for only by means of money measurements in money terms does or can mankind in the mass make its living.

But making money is only a surface fact in Economics. It is but a means to the end. By no possibility can it be rationally regarded as the ultimate object. The ultimate object of Economics is earning the living that money will buy. Both the object and the method lie below the surface of money-making. To Economics, making money is somewhat as book-keeping is to a commercial business. It is the surface expression of all underlying Economic phenomena.

Before those phenomena can be thoughtfully observed and studied, the relation to them of money-making must be keenly scrutinized and intelligently considered.

SECOND LESSON

MONEY

What is Money? and what are its functions? Money is the medium of trade, its denominations the language.

Resting on the surface of Economic phenomena, Money and Money terms spread over the whole of the Economic area. All subsurface phenomena in Economics are measured in trade by Money units; the details of trading transactions are discussed and recorded in Money terms.

Money terms vary with localities. In the United States, Money talks in terms of “dollars;” in Great Britain in terms of “pounds sterling;” in France in terms of “francs;” in Germany of “marks;” elsewhere in local terms too numerous for other than encyclopedic description. But the value measurements that Money makes of commodities in the processes of trade are everywhere, at any given time, practically the same.

For lack of stability those measurements do vary from time to time with confusing effect. To compare them with measuring rods for length, breadth and thickness, it is as if yards, feet and inches were constantly contracting and expanding with reference not only to the magnitude of measurable objects but also to one another. Precisely in that way does Money in fact fluctuate. It always has, and unless scientifically standardized, it always will.

Nevertheless, whatever the fluctuations and local discrepancies of Money may be, it everywhere talks, when its language is translated, to the same general Economic effect at any given time. Stabilized, as it might be, it would talk to the same general Economic effect everywhere and all the time.

What language is to thought, Money terms are to trade. The trading transactions of the whole world are effected by means of Money standards and in the language of universally interpretable Money terms.

Conventionally defined, Money consists of coins minted by governments from precious metals more or less alloyed. Those forms are supplemented, however, with subsidiary forms commonly known as “currency.”

There is an Economic theory that metal coins alone are Money, paper currency being but promissory notes redeemable in coin. This theory is useful for testing Money media by coinage standards. But with reference to nearly if not all purposes of current trade, the intrinsic value of the Money piece is of slight Economic importance, or would be if Money were stabilized.

What counts in Economic measurements is Money denominations--Money language rather than Money pieces. For in the world-wide processes of trade, only a slight proportion of either metal coin or paper currency passes from hand to hand. Nearly all Money measurements are entered in books of account; and in these the debits and the credits so nearly offset one another, by and large, that the difference as a whole is too slight for consideration in passing down from the Money surface of Economics to the basic facts. A common and impressive exemplification is afforded by clearinghouse statistics. These show that the enormous banking transactions in Money terms which merge at the clearings daily, are balanced off with a trifling percentage of tangible Money.

Let the fact be emphasized then, that in defining Money as the medium of trade, Money terms rather than Money forms are to be understood as the trading medium.

When a customer at a retail store buys a supply of groceries, his payment may be made in Money pieces, either metal or paper. Yet it may be made instead with a check drawn against his bank balance, or through a charge to his account in the retailer’s books. If paid in Money pieces, either at the time of purchase or later, some if not all of those pieces will go to the storekeeper’s bank and be credited to him in Money terms on the books of the bank. If the payment be made by check, the amount of the check will be entered in the storekeeper’s bank account as if it were a payment in Money pieces instead of Money terms. Be such transactions as they may, however,--cash payments or check payments or drafts or promissory notes--tangible Money plays on the whole but a small part.

From purchases by customers at retail stores back to wholesalers; back of wholesalers to manufacturers of finished products and of unfinished products and of tools and of every other kind of merchantable object; back to land-owners for the sources of supply and the sites for production and delivery; back to farmers, to miners, to transportation agencies, to a vast though scattered army of wage-workers; through many a complicated series of accounts at stores, factories, mines, real-estate offices, railway and steamship offices, banks, clearinghouses--must we wend our way if we would investigate the processes of trade in detail. Yet only in slight degree do those processes involve the use of Money forms. Though coinage standards play their part, almost all trading transactions are made in Money terms and not with Money pieces.

In the process, then, of making a living, mankind trades commodities in terms of Money rather than in its forms, doing so principally through financial accounts. Peering into the details of those accounts (as professional accountants and other business specialists must often do when examining the particulars of their respective specialties), however useful this may be within the limits of the specialization, is always futile and often confusing or misleading for purposes of Economic study or investigation as a whole. In Economics the purpose is not to understand the technical details of business specialties simply. It is chiefly to relate those details to one another by determining their respective Economic categories so that the whole subject may be reasoned about comprehensively.

Some business specialties may necessitate a knowledge in detail of the physical characteristics of sugar, for instance, or of cotton; but what an understanding of the science of Economics requires in such particulars is an intelligent grasp of the nature of sugar or cotton with reference to fundamental Economic categories--whether they are human, or natural, or artificial,--and to what extent, therefore, they are Economically related to all other commodities in the realm of trade. For into one or the other of those three categories, all the myriads of Economic details assemble themselves.

For purposes of Economic specialization, this assignment of details to categories is not enough; but without it no specialization is dependable. Some such identification of particular facts with reference to their fundamental differences or identities, is absolutely necessary for accurate observation of Economic phenomena and clearness of Economic thought; and are not accurate observation and clarity of thought the prime requisites of Economic study?

Not to make those identifications and differentiations is to turn Economics into the hopeless mixture of “masses of particular unexplained facts” which John Morley deplored as characteristic of a certain type of Economic science. “Scraps and pickings of reality” are worse than useless in any study of Economic science unless harmoniously classified according to their respective fundamental characteristics.

This comment does not mean that Economic details are to be ignored except for classification, even by non-specialists. Far from that. It means that they are to be thoughtfully considered and accurately classified for further and comparative consideration. To illustrate: Mankind must be regarded as a class or category in Economics; but not according to personal or individual capabilities, idiosyncracies, or social, business, or legal status. To the business specialist, the personal qualities of an associate or assistant are important; but Economics as a comprehensive science, the science of all “mankind making a living,” knows those special distinctions only in a secondary sense. It is concerned primarily with the individual man only as a unit in the human mass--only from the fact that he is in the human category and not in one or more other Economic categories. So of all Economic facts. To study Economic details without reference to Economic generalizations might be likened to studying an alphabet without reference to language, or numerals without reference to mathematics. Economic problems are not problems of how one individual may make a living at the expense of others. Such problems belong in the plundering pursuits. In Economics the basic problem is how all may make a living at the expense of none.

To that problem business details give no clew, unless the details be assigned to fundamental Economic categories. Piling up details without assigning them is, as Henry James the Elder wisely expressed it, to “sink the truth in endless confusion.” The last person in all the world from whom to get the basic facts of Economics is the business specialist, for he habitually limits his observations to his own specialty. Perhaps, however, a certain type of Economic teacher may be equally untrustworthy in that respect--the teacher who, though he imitates the physical scientist in devotion to details, disregards the physical scientist’s fidelity to the relations of cause and effect.

On the Economic surface we have the category of Money. To the wage-worker Money is the medium for trading the commodities he helps to produce for those he wishes to consume. To the merchant, however, or the manufacturer, or other Economic specializer, Money presents also a variety of minute details for expert study. The business accountant, for example, must familiarize himself with numerous details in connection with Money in its minute relationships to his specialty. He might very likely confuse facts Economically different, yet as a special business matter practically identical--the Money measurement of a natural mineral deposit, for instance, with the Money measurement of its artificial equipment. As an accountant in that specialty he would be right in doing so. Or, in slavery days, for another instance, an accountant might properly have classified the Money measurement of a human chattel with that of a domesticated horse or a constructed house. He also would have been right; for, as an accountant, he would have been dealing with a customary classification of private property; and not with Economic science comprehensively. It is doubtless specialty work of such kinds that has involved the science of Economics in so much confusion, especially among advanced students who are prone to identify business conventionalities with Economic normalities.

As a science, Economics cannot make its categories according to conventional maladjustments. It must make them according to essential differences. These admit of no categorical identification of mineral deposits with mining machinery, or of human beings with domesticated animals or buildings. Such classifications are as absurd in Economics as identifying sun and earth would be in astronomy, or bone with brain in anatomy.

The science of Economics--that is to say, the science of Business in the broad social sense in contradistinction to the narrow private sense--neither requires nor permits such classifications as slaves with domesticated animals, or mining machinery with natural mineral deposits. It is obedient to the ancient but still vital maxim of philosophy that things which are essentially different must not be mixed nor things that are essentially the same be separated.

Essentially different things in Economics are indeed confused by Money, which knows no difference, except in degree of Money measurement, between slaves and cattle, or mineral deposits and mining machinery. As the medium of trade, Money must measure the values of everything tradable; and custom may make tradable objects--human beings, for instance,--which in the science of Economics are no more within the normal boundaries of trade than are transfers by theft.

Whether we think of Money as tangible coin, or only as the Money signs and symbols of account books, Money is not a basic fact in Economics. Mankind cannot live upon Money. It is neither eatable nor wearable. Nor is it shelter. Likewise of Money terms. Money is a secondary Economic factor--a representative of value, whereby the relative desirability of commodities is measured and expressed in trade. It is therefore the comprehensive surface-fact of Economics beneath which the basic facts must be sought.

In other phrasing, Money is that secondary category in Economics which comprehends every kind and form of medium for trading commodities in the world-wide process that we descriptively characterize as “mankind making a living.” Mankind being a basic Economic category, and the process of making a living being the Economic human necessity and purpose, Money can have but one comprehensive significance in Economics. Be it in the form of coin, or in the form of paper currency, or in the form of entries in books of account (where it appears only in name and arithmetical denominations), it is the universal medium and Economic measuring rod of exchanges or trade.

Whether one makes Money or not depends, as a rule, upon which side of his accounts in ledgers the Money balance appears at final accountings. It is Money in this sense that goes farthest to justify the superficial definition of Economics as the science of making money.

We only skim the surface of Economic phenomena, however, by coming to an understanding of the nature and the function of Money. Money is only one of the secondary categories which must be identified and properly related in any thoughtful study of Economic science. Below that financial surface are phenomena which Money merely measures and compares. The first of those underlying phenomena is Trade, for which Money is the medium and upon which our attention must next be concentrated.

THIRD LESSON

TRADE

Trade, for which Money is the Economic medium and Money-terms the Economic language, consists superficially in interchanges of tangible commodities, but essentially in interchanges of human service.

Tangible commodities, with a semi-exception as to real estate, are produced by interchanges of human service from the very extreme of the primary production of those commodities to and including their final delivery for ultimate consumption. Real estate, too, is thus produced in so far as it consists of structures, of soil cultivation, of mining mechanisms, of excavations, or of any other kind of artificial alteration.

All commodities are subjects of Trade. Artificial commodities, such as depend upon human service for production, are not only subjects of Trade but are also its products. This is absolutely true of every kind of artificial commodity that is produced to completion, inclusive of final delivery, by means of Economic specializations--specializations in human service. The primary materials and the unfinished parts are gathered together and delivered, both in the intricate process and finally, by means of Trade.

A loaf of bread, for example, is brought to completion from harvest-field to bakery, and thence as a finished product, through many deliveries (including delivery to its ultimate consumer) by means of Trade. So is the implement with which it is cut at the consumer’s table, and the plate on which it rests, the table at which it is served, the cloth which covers the table, the chair in which the consumer sits at the table, and the dining room floor beneath them all.

Of the vast variety of such commodities as loaves of bread and knives for cutting them and plates and tables and tablecloths by means of which they are served for ultimate consumption, very few if any at all of that variety of commodities--whether finished, as a loaf of bread on the consumer’s table, or unfinished, as the growing grain or the flour of which the loaf is composed, or the fuel that bakes it, or the bricks or the metal of the baker’s oven, or the finished oven itself--give distinctive expression to all the human services they embody.

That fact could be further illustrated with any artificial commodity in course of Trade. A hogshead of molasses on a wharf would answer the purpose. To thoughtless observation this commodity might seem to embody no other human service than work on a sugar plantation and by barrel-makers in a coopering shop. But if we think about it with penetration and clarity, we readily realize that it embodies the services also of lumbermen, of miners, of railway workers, of bankers, possibly of importers and mariners, probably of exporters and their assistants, certainly of draymen, of wharfmen, of merchants, of book-keepers and other accountants--a veritable host of specialists whose contributory services are not emphasized by the tangible commodity (a hogshead of molasses on a wharf) as are the services of plantation-hands and barrel-makers. Multitudes of human services in distracting variety are concealed in that familiar commodity from the vision of all but specialists; perhaps from their vision too in so far as the services are outside of their respective specialties. And if we were to follow that hogshead of molasses to its Economic destination, we might perceive many an additional human service embodied and concealed in commodities of Trade for which the material would have been supplied in part by molasses from the hogshead and probably in part by the hogshead itself.

Trade is not a mere business custom, as is sometimes carelessly supposed. Only to the extent that they conform to natural Economic law can trading customs be socially beneficial or continue without developing social disaster.

Many customs do enter into Trade, even as habits enter into the life of individuals--some beneficial and some vicious, some in harmony with natural law and some defiant or evasive of it. But essentially Trade is a natural expression of Economic relationships. It is consequently as dependent upon conformity to natural laws as are the physical functions of individuals. Drawing inspiration continuously from natural human impulses, giving constant and increasing satisfaction to natural human needs, bringing natural human units ever closer into a natural social whole, contributing one of the two indispensable and fundamentally effective as well as obvious natural powers and facilities for the continuous and increasing production of human satisfactions, Trade is evidently as natural to the social whole as is breathing or eating to the individual. It must therefore be as completely subject to natural law.

By nature man is “a trading animal.” So it has often been said, and the saying is manifestly true. There is, however, no implication here that man is an animal only. The suggestion is that, although an animal, he is more than an animal, and that Trade develops phenomena which go to prove it.

Of all animals, man only is within the jurisdiction of the natural Economic laws of Trade. What other animal than man could be correctly described, in a comprehensive sense, as “a trading animal”? Not only is this characteristic distinctive. Not only is it peculiarly human. But also, and by force of natural Economic law--not commercial custom, but those natural sequences of effect from cause to which arbitrary commercial customs must yield or come to grief,--it enables mankind, the larger man, the social man, to multiply the Economic powers of each individual of the human race.

Primary among those natural laws of Trade is the thoroughly tested sequence alluded to above, that Trade multiplies productive power. It does so by inviting, requiring and developing that characteristic phenomenon of Trade which is commonly called “division of labor,” but may be distinguished best as Economic specialization.[2] This phenomenon gives to the world, gives to it as a natural effect of Trade, a productive power per capita far and away beyond the productive power of any isolated individual.

[2] The principle of Economic specialization could hardly
be better illustrated than by the reply of an old-time
compositor in a printing establishment who contemplated
making a contract for the erection of a cottage home for
himself and his family, when a friend suggested that he
might save money by digging the cellar himself between
working hours at the case. He replied: “I can dig a better
cellar and more easily at the case with a composing-stick
than on the spot with a pick and shovel.”

By means of a vast variety of Economic specialties--such for illustration as farming, engineering, mining, lumbering and their respective and numerous subdivisions, through a vast variety of other Economic specialties, such as transporting and manufacturing and merchandizing, along with their respective and multitudinous subdivisions, all supplemented by such other Economic specialties as banking, teaching, preaching, adjudicating, writing, acting, and the fine arts--the necessaries for individual sustenance and the luxuries for individual enjoyment are produced and delivered in quantity, variety and perfection which, when calculated per capita, rise far above and extend far beyond all the possibilities of isolated individual life, far above and beyond the possibilities of community life in narrow environments.

Were there but one individual to be considered, the natural advantages of Trade would seem as fanciful as a fairy story. Were there only a small group, the natural advantages of Trade, though manifest, would be too few and too primitive to disclose its wondrous powers of production. But when millions of individuals cooperate, some serving all and all serving each through the intricacies of worldwide Trade, mankind is welded into an Economic unity, a gigantic oneness--a larger human being, “the social man” as this social organism is sometimes not inaptly called--an organism composed of individuals who give it vitality and whom in consequence it serves as a beneficent giant might serve a cooperating pigmy.

Involving the production of commodities by individual contributors of human service through an infinity of specializations, and their assignment to individuals by the intricate processes of service for service, Trade tends not only to increase the per capita supply of commodities, but also to effect their fair per capita assignment in proportions corresponding to the relative desirability of the numerous and various contributions of individual service to their production.

In describing Trade as consisting essentially of interchanges of human services, we are of course to be understood as including not only such services as are embodied in tangible commodities, but also personal service. Nor does it make any Economic difference whether the personal service be of the “servant” type or of the “professional” type.

“Professional” services, such as those of Economists, Engineers, Architects, Clergymen, Lawyers, Physicians and Teachers are in the Economic domain of Trade. Not only are they exchanged for tangible commodities, but they contribute to the production of such commodities by conserving, and it may be by increasing the efficiency of more obvious producers. The Economist studies productive relationships for the purpose of securing harmonious industrial adjustments; and so vital is his function that righteous social relationships are imperiled, and righteous readjustments obstructed, if he mistakes chaos for order. The Engineer designs, plans and directs; and so important is his function that the work of hosts of producers depends upon it. If he mistakes, great structures may fall. The Architect is an Engineer in a special sense: if he makes mistakes, buildings may lack stability or beauty or both. The Lawyer may disentangle societary complications that would operate as a check upon production and Trade. The Clergyman may discourage obstructive conduct; the Physician may conserve the health of more direct producers so as to increase their efficiency; the Teacher may increase their efficiency by instruction. And so of personal services of the Personal Servant type. Whatever a Personal Servant may do for a commodity specialist which otherwise the specialist must do for himself at the cost of contributing less to the production of tangible commodities, is to that extent a contribution to the production of those commodities. Interchanges of human service, if the interchangers act in freedom, each getting from the channels of Trade the equivalent in service of the service he renders, are contributions to Economic production.

The relative desirability of human services rendered in promoting production, whether directly or indirectly, is commonly as well as commercially and Economically known as Value, which, as already explained, is expressed in Money terms and compared by Money measurements.

To receive a share in the continuous distribution of commodities through Trade is the human motive for all Economic activity, from leadership in Economic service to service for “wages.”

A “wage-worker,” for illustration, lends a hand--becomes “a hand,” if you please,--at harvesting wheat. His compensation is to be, let us assume, his food and lodging during harvest and twenty dollars in Money at the end of his job. The work being done, his food and lodging having been meanwhile supplied to him, and the twenty dollars in Money having been duly paid him, what has been the Economic nature of his transaction? Has not this “harvest hand” exchanged his contribution of service to the production of wheat, for his living while helping to produce it and for a twenty-dollar measurement of any commodity or commodities he may wish to draw from the channels of Trade?

Assume now that he draws from those channels a pair of shoes, a hat and other commodities at the village store, including, perhaps, some tobacco for his pipe and a bit of candy for a little friend. As matter of Economics, then, what has he done but Trade his service at harvesting for his living while at work and some service-produced commodities for still further satisfying his desires?

And the Economic leader in that connection, the farmer who hired the “harvest hand,” what has been his part in the transaction? In the last analysis has he not for harvest service traded food, house accommodations, household service, and his Money title to twenty dollars’ worth of any commodity or commodities that may be flowing through the channels of Trade--a title for which he presumably has given, or through debit and credit adjustments must in the future give, his own service or the service of others which he may naturally and justly or only customarily and unjustly command as his own?

When an employer in any branch of Economics pays an employee “wages” or “salary” or other compensation for service, he buys his employee’s service by an interchange, through Trade, of human service for human service.

Nor are interchanges of service limited to employers and employees.

The point of final interchange is almost invariably like the illustrative instance of the “harvest hand” at a retail store. Through the processes of Trade, myriads of commodities for the satisfaction of human wants, commodities produced by human service to the point of delivery to ultimate consumers, flow to ultimate consumers out of retail stores. These depots for final delivery in Trade are the customary terminals of production, where certifications of service in terms of Money are usually exchanged for products of service in the form of commodities.

Although such exchanges, like other exchanges throughout the processes of Trade, are made in Money terms and by Money measurements, these terms and measurements testify, as explained in the preceding Lesson, only to the relative values which govern the exchangeable relations of any commodity or commodities with any other commodity or commodities.

Curiously enough, Economic students who ignore “value levels” readily recognize “price levels.” But what else are “price levels” than “value levels” expressed in Money terms? If a hammer will exchange for a chisel in the processes of Trade, they are of equal value--not price, but value. If the Money price of one is two dollars and that of the other is also two dollars, they are of equal price as well as equal value. And except as Money may vary in purchasing power through lack of stabilization, or commodities may vary in relative desirability or industrial cost, the price level and the value level tend to rise and fall together. That is to say, the essential consideration is one of relative values of commodities (which is determined by difficulties of production and delivery), but the superficial consideration is the purchasing power of Money, by which those relative values are more or less accurately measured and expressed in price lists.

Values thus expressed rise and fall. They do so in terms of Price when measured by Money; they do so in the essentials of Value when measured by comparisons of commodities. As a rule, however, Money-prices are fair guides to Commodity values. Commodity values rise and fall according to cost of production, inclusive of delivery; and in so far as Money is stable, the rise and fall in prices is evidence of variations in production cost.

The relative rise and fall in Value, be it measured by prices in Money or otherwise, is so common a phenomenon of Trade that critics might be pardoned for denying a Value level.

Nevertheless there is such a level. It may be illustrated by “sea level.” We readily understand and confidently base important physical calculations upon the assumption of a constantly level sea. Yet there is no such thing. Waves rise above the surface of the sea at their crest and fall below it in their hollows. Tides contribute other variations. So with Value in Trade. Literally a level of Value is unknown. Values continually rise and fall, like the waves and the tides of the sea. Yet there is as to Value a “mean level.” Such a level or tendency may be found in the relation of service-cost to consumption-desirability.

Though we measure service-value by Money, though Money fluctuates as a Value-measuring device, though some individual services fall in product value relatively to the productive power of service, though some individual services may increase in Value for one reason or another, there is nevertheless a Value level in Trade which tends constantly to maintain an equilibrium between service-value and service-utility. Money-measured Value and Money standards of Value may rise above or fall below the service-cost of produced commodities. Nevertheless, service-cost in commodities is the determining fact--the Value level in Trade. Measured and expressed by Money, that Value level is the Price level.

Trade phenomena, to which this Lesson has been devoted, though they lead down to the Basic Facts, the foundation facts, of Economics, do not themselves, either wholly or in any of their details, belong in the Basic Fact region. Though nearer to the Basic Facts of Economics than the phenomena of Money, our consideration of which immediately preceded our consideration of Trade, the phenomena of Trade are one layer above the Basic Facts toward which we have been delving down from the Economic surface, Money, and through the subsurface, Trade. To the Basic Facts of Economics our next Lesson will be devoted.

FOURTH LESSON

THE BASIC FACTS

The purpose of the preceding Lessons has been to pierce through the surface and the immediate subsurface of Economics down to the Basic Facts. On the surface, as we have seen, Economics appears to be the science of making Money, whereas Money is in fact only the medium and measure of Value in Trade. We have further seen that the immediate subsurface, Trade, consists apparently in exchanges of tangible commodities but essentially in interchanges of human service. We are now to inspect the Basic Facts.

The Basic Facts of Economics consist of natural groupings or categories of all the myriads of minor facts with which the science of Economics is concerned. Of those categories there are exactly three. By no possibility can there be more; by no possibility can there be less. Natural law fixes the number.

The first Basic Fact--not first in order of creation, but first in our perceptions of Economic necessity--is Man. Without Man, Economics could have neither incentive nor power, neither cause nor effect.

The second Basic Fact is Natural Resources, without which Man could not exist. Natural Resources comprise the surface of our globe, together with all natural objects external to Man and in their natural condition, upon the surface, under the surface, and above the surface, including the air surrounding the surface.

Through applications of the energies of the first to the offerings of the second, Artificial Objects are produced, and these constitute the third of the three.

To one or another of those three natural categories every variety of detail that may be involved in any Economic problem must be assigned. Not so to assign those details to their appropriate categories is to invite confusion of thought and to risk arriving at false and socially dangerous conclusions.

The Economic student who mixes such Natural Resources as building sites with such Artificial Objects as buildings, or natural deposits of minerals with mining machinery, or natural surfaces with railway roadbeds and tracks and equipment, or farming tracts with farm improvements, or human slaves with real estate or stocks of merchandize or factory mechanisms, makes an inexcusable blunder.

Such mixtures may be unobjectionable in accountings of the assets of a private business for private purposes; but in general Economics they are perplexing and misleading. In this comprehensive social science every Economic detail must be classified in harmony with the three Basic Facts--Man, Natural Resources and Artificial Objects,--or confused thinking will result. To make those classifications, however, is to lay a firm foundation for correctly estimating Economic phenomena of all possible kinds and in all their relations.

The human factor, Man--an impossibility without Natural Resources in the comprehensive sense of that term,--applies his energies of mind and body to the Natural Resources of our terrestrial globe and its enveloping atmospheres, thereby producing and for his satisfaction consequently consuming every variety of Artificial object within the range of his Economic desires and his Economic capabilities. This is true of Man and of Man only.

Lower animals do not produce Artificial Objects. Do they cultivate? No. Do they design or invent? No. Do they Trade? No. Do they in any way improve? No. As was eloquently said by a distinguished Economist of the last century, “the sea-gull of the English Channel who poises himself above the swift steamer, wants no better food or lodging than the gulls who circled round as the keels of Caesar’s galleys first grated on a British beach.”

If wild birds make nests and wild animals make burrows or build dams, and wild bees make honey, so do wild berry bushes grow berries and wild apple trees bear apples; yet who would think of classifying wild fruits as Artificial Objects? Manifestly, uncultivated fruit is as truly in the category of Natural Resources as is the wild tree or bush that bears it. And how do wild animals and their characteristic products differ in that respect from wild fruit bushes and wild fruit trees? Evidently in no wise at all. Their products of nest and burrow and water-dam and all the rest, like the leafing and the fruitage of the tree and the bush, are natural objects. They are not artificial. An Artificial Object is a product of human invention and construction. For every purpose of Economic classification, wild animals, like wild trees and wild bushes and wild Nature in all its varieties, belong in the category of Natural Resources. When the wild trees or the wild bushes are cultivated, or the wild animals are domesticated, they pass into the category--as manifestly as buildings and farm produce do--of Artificial Objects drawn forth from and upon Natural Resources by Man.

If now we unravel the countless and confusing Economic phenomena of our world by assigning each miscellaneous fact as it faces us to its natural place in the three categories or Basic Facts, and then observe with common-sense acuteness the natural laws of cause and effect that govern the mutual relations of those Basic Facts, we put ourselves in position to solve correctly every Economic problem that can challenge solution. Not to do so is to invite confusion of thought and false conclusions. Those Basic Facts are the “Big Three” of the Economic universe.

Hints at all this came to us in passing through our Lesson on Economics, our Lesson on Money, and our Lesson on Trade. For confirmation of those hints and of the generalizations of the present Lesson, let us with Money in hand and Trade in mind visit one of the Trade terminals which are known in every-day speech as “retail stores.”

What do we see at this “store” but a complex aggregation and combination, in multitudinous and confusing variety, of the services of Man in producing Artificial Objects from and upon Natural Resources to ultimate consumers through channels of Trade and in terms of Money?

The number of those products here assembled, together with the complexity of the infinite detail involved in their production, would be bewildering were we to plunge into the ocean of particular facts unequipped with a clear mental grasp of the Basic Facts and their mutual Economic relations. For illustration, here is a barrel of potatoes to which the store clerk calls our attention with a view to delivering it to us in Trade for some of our Money.

Now, what could be simpler at first thought than a barrel of potatoes as an Economic fact? A farmer has “raised” the potatoes and brought them to market, where we may have them for their Money price. But what of the farmer’s “help”? and the plough with which he prepared the ground? the hoe or more modern implement he used in the processes of cultivation and of reaping the crop the horses or the motor he ploughed with? the building in which he stored the crop before marketing it? the wagon he carried it to market in? the transportation equipment with which it was carried from a larger market place to this retail store? the factories in which the barrel was promoted from lumber to its present condition of usefulness? the factories and stores and railroads and ships and wagons and tools? the banks and book-keepers and truckmen? All such factors must be taken into account, with many more, in their vast and various and intricate relationships, if we are to know the Economic history and to solve the Economic problems regarding even so familiar an Artificial Object as a barrel of potatoes on sale at a retail store.

Every one of those Economic details can be considered intelligently, readily and accurately, through the medium of the three Basic Facts, into one or another of which must fall, not only that barrel of potatoes and all the details of its production, but also the entire stock of the store, and of all other stores, and every Economic agency back of them to the very beginning of each productive process through which they have passed. All Economic details, the familiar and the unfamiliar, the obvious and the mysterious, the known and the unknown, generalize with precision into the three Basic Facts of Economics--Artificial Objects, Natural Resources and Man.

Natural Resources are the source and the indispensable condition at every stage, from beginning to end, in the production of every kind of satisfaction for human wants. Man is the active agent at all stages. Artificial Objects constitute the category into which each result generalizes at each stage of production. From Economic particulars we derive knowledge of Economic detail and skill in applying that knowledge; but only from their correct generalization can we derive Economic wisdom.

Thinking _about_ the three Basic Facts is necessary to an understanding of their mutual relations; thinking _from_ them is necessary to an understanding of the mutual relations of their constituent parts. Reversely, we must think from Man to Man-power of numerous kinds, both mental and physical; from Natural Resources to soil, minerals, air, water, building sites, and so on; from Artificial Objects to houses, tools, machinery, food, clothing, et cetera.

In another form of statement, the Economic student must know and understand the comprehensive categories or Basic Facts in order to grasp the Why of Economic adjustments, the natural relationship of Economic effects and causes. To understand the How, he must also know and understand the little facts of Economic specialization, such as the mutual relations of the details which go to make up those wholes--the particular facts, for instance, of agriculture or architecture or engineering or merchandizing or manufacturing or banking or professional service,--as well as their three comprehensive classifications or Basic Facts--Man, Natural Resources and Artificial Objects.

One of the deplorable tendencies in Economic study comes from a disposition among advanced students to think exclusively within such narrow fields as banking, manufacturing, transportation, merchandizing, the cotton trade, the silk industry or agriculture. All trustworthy Economic thinking must be from fundamentals--from Natural Resources, Man and Artificial Objects--to the minute details of the respective Economic specializations. All Economic specializations, to the uttermost of their Economic minuteness, are subject fundamentally and in their mutual relations to the natural Economic laws that govern the inter-relationship of the three Basic Facts--Artificial Objects, Man and Natural Resources.

That barrel of potatoes in the retail store may serve for an example.

The barrel itself, an Artificial Object, was produced by Man from antecedent Artificial Objects--staves and hoops. The staves and the hoops were produced by Man from preceding Artificial Objects--lumber and iron. The lumber and the iron had come from trees felled and ores extracted by Man; the trees were Natural Resources, unless cultivated by Man, in which case they were Artificial Objects produced from and upon Natural Resources (the earth) and descended from trees which in their earlier days were themselves Natural Resources. The iron ore was an Artificial Object produced by Man from Natural Resources known as ore deposits. So the barrel holding those potatoes at that retail store proves to be throughout its whole Economic history nothing but a combination of many kinds of Artificial Objects every one of which has been produced and all of which have been combined by Man from and upon and within the Natural Resources of earth and air and light and heat and electricity and other natural characteristics of the planet that Man inhabits.

So, also, of the potatoes in the barrel.

And like that barrel and those potatoes, the retail store in which we find them was itself produced through many Economic specializations and many stages of industrial progress, each of which, from the extraction of iron from natural mineral deposits and the taking of timber from natural forests, was a production by Man of Artificial Objects from and upon and within the sphere of Natural Resources down to the placement of that artificial structure, the retail store, upon its Natural-Resource site at an advantageous point for delivering finished products to ultimate consumers.

As to that barrel of potatoes and that retail store upon the floor of which it rests, so of all Economic phenomena. They belong respectively, according to their respective Economic characteristics and pursuant to natural law, in one or another of the three categories or Basic Facts which we have respectively identified as Natural Resources, Man, and Artificial Objects.

Pursuant to natural law? Certainly. But where do we get any natural law in Economics? To quote a sarcastic attempt at refutation, “Do we pick it off the trees?” Yes, some of it we pick off the trees. Who can intelligently observe the growth and fruitage of a tree without recognizing operations of natural law? How do trees grow except by operation of natural law? And except by operation of natural law, how do men’s bodies grow? Is it enough to answer that the growth of the body is a problem of physical science, which is subject to natural law, whereas Economic science contemplates a lawless lot of phenomena? Or men’s minds, do they unfold without the aid of any natural laws of human mentality? And what of social or mass mentality--shall we call it “public opinion” or “herd instinct”?--how does that phenomenon originate and develop except through processes of natural law?

As with a tree, so with the whole physical universe, inclusive of the human body. And as with the human body, the physical body and the social mass, so with the mental equipment. Must not all, for their very existence and for their development also, be dependent upon and in all their activities responsive to natural law in one or another of its jurisdictions--responsive happily or unhappily according to their degree of conformity or defiance, of devotion or indifference?[3]

[3] For an extended and impressive discussion of the
application of natural law to Economics, see “Natural Law
in Social Life”, by W. R. Lester, M. A., published by
The United Committee for the Taxation of Land Values, 11
Tothill Street, London, S. W. 1, England. For a specific
application to the coal industry, see minority report on
the bituminous coal problem by Warren S. Blauvelt (formerly
of Terre Haute, Ind., latterly of Troy, N. Y.) in the
Proceedings of the National [American] Conference on Social
Work at its fifty-third session in 1926.

Individual activities, whether physical or mental, if that discrimination be permitted, assuredly work out well or ill as they harmonize or run counter to natural law. This must be true also of social activities. The choices made by human beings, and the influences which affect their choices, operate to produce harmony or discord in Economic relationships in so far as they harmonize or are in conflict with natural Economic law.

Economics being the science of a certain range of social activities, “the science of mankind making a living,” as it has been aptly called--a science, and not a mere collection of odds and ends of information--the same conclusions must be true of the science of Economics as of the physical sciences. Both are scientific in so far and only in so far as they are within range of natural law.

It is, indeed, a common contention in scholastic Economic circles that the science of Economics is not governed by natural law as the physical sciences are. The answer would seem to be conclusive, in so far as that contention is true, that Economics cannot be a science at all.

Nor are some of the Economics of modern universities strictly scientific. They disclose a tendency to confuse business customs with Economic science as if they were identical. This characteristic of those “business colleges” of a previous generation seems to have charmed the “scientific” Economists of some of our universities. But Economic science and business customs or arts are not identical. Business arts and customs which conflict with natural Economic law are as certain to culminate in disaster as is the life of a man who, approaching a wide and deep chasm, attempts to walk across it without a bridge. Such a bridge cannot be created, it must be produced in accordance with natural physical law. The same is true of Economic processes. As physical science cannot create, but can only discover and apply natural physical laws, neither can Economics create, but must be content to discover and apply natural Economic laws.

The contention that Economics is not subject to natural law may be fairly regarded as a lineal descendant of the social doctrine that there are no natural rights in human relationships, but that human rights are only conventional. This is the lawless and vicious doctrine upon which slavery and every other form of social larceny have rested, from that form which held the Forty Thieves together, to that modern policy of “get what you can and keep what you get.”

Economists who can offer any other effective process for satisfying Economic desires than by the production of Artificial Objects from and upon Natural Resources and in accordance with natural laws, Economic as well as physical, would thereby kill every inference that may be correctly drawn from any contention in these pages. But until that miracle has been performed it behooves all advanced students of Economics to think, and to think clearly, without active prejudice or indolent confusion, upon the natural phenomena of the Economic realm. Give to those phenomena whatever name you please--my name for them is “natural law”--the fact nevertheless remains, a Basic Fact in Economics, that no Man nor any number of Men can produce Artificial Objects to or from any stage of the productive process except from and upon Natural Resources.

Natural law in Economics is not comparable with “common law” in the sense of a coordination and sanctioning of social customs. Nor is it “business law” in the sense of a clutter of commercial customs. And of course it is not “statutory law” in the sense of commands from political authorities to obedient citizens. In Economic science, as in every other science or art worthy the name, natural law uniformly and inexorably governs the relationship of cause and effect.

Browning struck a key-note when in his “Abt Vogler” he wrote of the “manifold music” evolved by bidding the organ obey, that--

... “effect proceeds from cause,
Ye know why the forms are fair, ye hear how the tale is told;
It is all triumphant art, _but art in obedience to laws_.”

If any Economic experiment “works” (as a pragmatist might say of it), why does it work? What other explanation can there be than that it “works” because it is a correct adaptation of cause to effect in obedience to mandates of natural Economic law.

Consumption of food is a natural effect of the natural necessity for food--a natural law. Production of food is a natural effect of the natural need of food for consumption--a natural law. Resort to Natural Resources as the sole source and foundation from and upon which to produce food is a natural effect caused by the natural need for food--a natural law.

Nor can natural law be limited to the individual man any more than it is to trees. Associated man also is governed by it. It is the latter relation that distinguishes it as Economic. From the natural desire of individual man for production from and upon Natural Resources, social Trade develops, not arbitrarily but as a natural consequence of a related natural cause. Let thoughtless students and professors of Economics who deny natural Economic law--the normal conditions of cause and effect that govern cooperative mankind in making a living--explain Economic phenomena, if they can, without reference to Economic cause and effect, or Economic cause and effect with natural Economic law left out.

Natural Economic law might, perhaps, be given another and more accurately descriptive name. Yet its existence and its potency for good results or bad, according to obedience or indifference to it, are beyond all possibility of denial by any Economic student who knows what it means and who, thinking with clarity, speaks with a sense of responsibility. Its name, “natural law,” is simply a common and convenient term, whether truly descriptive or not, for indicating the undeniable fact that in Economics as in every other science, identical effects invariably proceed from identical causes.

Most plainly and incontestably is that observation true with reference to the three Basic Facts in Economics. That they are no haphazard phenomena in their mutual relations or otherwise must be inferred from universal experience. Artificial Objects for human use are produced by Man, and only by Man, from and upon and only from and upon Natural Resources. Man does not create. He produces, which means that he adapts. And in his processes of adaptation or production, he succeeds to the degree that he conforms to natural conditions over which he has no control except by conformity. Call those conditions by whatever name we may, they have all the characteristics of natural law, or natural orderliness, over which Man has no other powers of command than by adaptation of natural means to artificial ends. Natural law would therefore seem to be the most appropriate name--law beyond the control of Man except by his adaptation of natural resources to artificial effects.

Questions of natural law or no natural law in Economics aside, however, we are confronted by facts which common-sense minds cannot escape. Even if there be no natural laws of Economics--a contention that would seem to demand more imagination than thought,--it is none the less a fact that Artificial Objects never have been produced, are not produced now, and in all probability never will be produced on our revolving globe, except by Man and from and upon Natural Resources. Also it is a fact, whether subject to Natural Law or not, that Man cannot live without Artificial Objects, nor without Natural Resources from and upon which to produce and consume those objects. These facts recognized, disputes over the existence or non-existence of natural law in economics are mere mental gymnastics which may be ignored without prejudice to the essentials of any contention in these pages.

The process of human adaptation of Natural Resources to Artificial effects--or, to use the Economic term, the process of Production,--no matter how complex, is continuous from original conceptions in the human mind to completion and delivery of products to ultimate consumers by the human mind and hand.

FIFTH LESSON

THE PRODUCTIVE PROCESS

The Productive Process in Economics is a complicated sequence of activities in the bringing forth by Man, from and upon Natural Resources, of Artificial Objects. It begins with initiatory adaptations of natural raw materials; it ends with deliveries of finished products to ultimate consumers, in accordance with their demands.

Finished products may be catalogued in general terms as food, clothing, dwellings, luxuries and other Artificial Objects which have come into the possession of ultimate consumers for the satisfaction of their wants. Drawn from Natural Resources, these products return to Natural Resources in the course of their consumption, though not necessarily to the identical places from which they were drawn.

Their substance is indestructible. Man can no more destroy an atom of the physical universe than he can create one. His powers in Consumption as in Production are limited to _altering_ Natural Resources in location and form. The essential Economic difference between Production and Consumption is that Production alters natural objects so as to adapt them to the satisfaction of human wants, whereas Consumption alters Artificial Objects in the process of satisfying those wants. Production is the drawing forth by Man of Artificial Objects from and upon Natural Resources; Consumption is the passing back by Man of Artificial Objects to Natural Resources.

With the processes of Consumption the science of Economics has nothing to do. Its functions end with delivery to final consumers. Whenever Consumption is declared to be a phase of Economics, thoughtful consideration will ascribe the declaration, not to the processes of Consumption but to the preceding demand for Artificial Objects to consume.

The human demand for Artificial Objects to consume is the incentive to the Productive Process. Production, therefore, and demand for Consumption, are Economic correlatives, Production having Consumption for its object, demand for Consumption depending upon Production for satisfaction. Without Production by Man, there could be no Artificial Objects to consume; without Consumption by Man, there would be no incentive to produce.

Production must, of course, precede Consumption. No Artificial Object can be consumed before it has been produced. But demand for Consumption as certainly precedes Production. An opposite inference might be drawn from the fact that particular Artificial Objects are often produced in advance of specific demand for them. In fact, however, the output is always in response to demand, either actual or probable--like the outflow from a reservoir of water which follows the inflow but to which there would be no inflow were it not for anticipated demand. Production in advance of actual demand indicates nothing more than that the producers are confident that such demand exists in embryo. If they err, the Products have no market; if they have guessed aright, the volume of Products increases to meet the demand. By and large, then, demand for Consumption regulates Production; or, in Economic phrasing, supply in Production is determined by demand for Consumption.

Being continuous, the human demand for Artificial Objects to consume stimulates continuous Production; being progressive, it promotes improvement in Productive methods and accomplishments.