235. Is the rate of interest affected by the supply of the precious metals?
236. What determines the rate of interest on the loanable funds? Is the “current [or ordinary] rate of interest the measure of the relative abundance or scarcity of capital”?
237. What are the chief causes that determine the rate of interest?
238. If it be true that in America every man, however rich, is engaged in some business, but that in England many rich men have no trade or profession, how is the rate of interest in each country affected in consequence, and why?
239. How does a fall in the purchasing power of money tend to affect, if at all, and why, (1) the rate of interest, (2) the price of land, (3) the price of government bonds, (4) the price of gold and silver ornaments and plate?
FOREIGN COMPETITION.
240. Explain the grounds of Mr. Mill’s proposition that general low wages never caused any country to undersell its rivals, nor did general high wages ever hinder it from doing so. If you think the proposition needs qualification, give your reason.
241. (1.) What is the true theory of one country underselling another in a foreign market? (2.) What weight should be attributed to the fact of generally higher or lower wages in one of the competing countries?
242. Discuss the question whether a high rate of wages necessarily lays the commerce of a country under a disadvantage with reference to a country where the rate of wages is lower.
243. What are the conditions under which one country can permanently undersell another in a foreign market?
244. Point out distinctly the connection between the money wages of laborers in the United States and the productiveness of the soil.
245. In the Eastern States iron-molders earn from fourteen to seventeen dollars a week; in California their wages run from twenty-one to twenty-seven dollars. Account for this variation.
PROGRESS OF SOCIETY.
246. What are the reasons for the change in the normal values of manufactured and of agricultural commodities, respectively, during the progress of society?
247. Wages and profits in different employments and neighborhoods are not uniformly proportional to the efforts of labor and abstinence of which they are the respective rewards. Classify the circumstances which prevent this correspondence, and show how far their effect is likely to be reduced (_a_) by general economical progress, and (_b_) by the extension of the division of labor.
248. What is the law of diminishing returns? Can you point out any connection between this law and the following phenomena?— (_a._) Density of population.
(_b._) Rate of wages.
(_c._) Rate of profits in different countries.
249. Sketch the influence on rents and profits of an increase of population and capital concurrently with a stationary state of the arts of production.
250. Is there reason to believe that Mr. Mill has underrated the powers possessed by man of extending the area of production and facilitating the market of food? If such a statement has been made, to what extent is his theory of population modified, and the risks he had indicated rendered distant?
251. Compare the effects on rent, profits, and wages, of a sudden improvement in the production (_a_) of food, (_b_) of some manufactured articles largely consumed by the working-classes.
252. Trace the connection between Ricardo’s theory of rent and the decline in the general rate of profits as a country increases in population.
Explain clearly the connection which exists between wages and profits.
253. What effect is produced upon rents, profits, and wages, respectively, in a country like France, where population is stationary and capital advancing?
254. If capital continued to increase and population did not, explain the proposition that “the whole savings of each year would be exactly so much subtracted from the profits of the next and of every following year,” if improvements were stationary.
255. How does social and industrial progress tend to affect the prices of land, raw produce, and manufactures, respectively, and why?
256. The capitalized value of land rises, in the progress of society, from two causes—from one which affects land in common with all investments; from another which is peculiar to land.
257. “The tendency of improved communications is to lower existing rents.”
How far is this true, and in what directions is it true?
258. What would be the effect on profits, wages, and rents of an improvement in a manufactured article consumed by the laboring-class?
259. Explain the doctrine of the tendency of profits to a minimum, the cause of that tendency, and the circumstances which counteract it.
260. What was Adam Smith’s doctrine as to the decline of profit in progressive communities? Criticise his argument.
261. Mention some of the principal causes which, in the ordinary progress of society, respectively tend to increase or to reduce the current rate of profits.
262. Why do profits tend to fall as population increases, and how may this result be retarded or prevented?
263. What is the effect of a general rise of money wages, apart from the consideration of a greater efficiency of labor, in prices, profits, and rent? Give reasons for your answer.
264. How does the general progress of society in wealth and industrial efficiency tend to affect the rate of wages, the rate of profit, and the rate of rent, respectively?
265. What is the general effect of the progress of society on the land-owner, the capitalist, and the laborer?
FUTURE OF LABORING-CLASSES.
266. Examine the influences of machinery on the economic condition of the working-classes.
267. Mention and discuss some of the popular remedies for low wages, and especially the effect of the subdivision of landed property among peasant proprietors.
268. Explain briefly what is meant by co-operation, and indicate the more prominent forms assumed by the co-operative movement.
269. What is meant by the co-operative system of industry? Show ways in which this system may affect, for good or for evil, the productiveness of labor; and mention any moral benefits, or the opposite, in which it may be expected to issue.
270. What are the difficulties in the way of co-operation for the production of salable objects?
271. Explain the advantages of industrial partnership, in which the employés share, in proportion to the wages received, half the profits of the business beyond a certain fixed minimum which is assigned to the employers.
TAXATION.
272. How is the state justified in undertaking any manufacture or service which might be performed by private enterprise?
273. Enumerate Adam Smith’s canons of taxation.
274. Examine the argument in favor of the resumption by the state of what is called the unearned increment in the value of land arising from the development of society.
275. A picture by Gainsborough and a house in Broadway are sold in the same year at the same price; at the end of fifty years each sells for five times its first cost. Is there any, and, if so, what, reason why the increase should be sequestrated for the public benefit in the one case and not in the other?
276. Explain the incidence of taxes laid on wages.
277. Why should a tax on profits, if no improvements follow, fall on the laborer and capitalist?
278. Explain what effect, if any, will be produced on the price of corn by— (1) a tax upon rent; (2) a tithe; (3) a tax of so much per acre, irrespective of value; (4) a tax of so much per bushel.
279. On whom does a tax of a fixed proportion of agricultural produce fall?
280. Discuss the question whether the income-tax ought to be a tax upon income and property, or upon expenditure.
281. Discuss the expediency of a graduated income-tax.
282. State the arguments which you think strongest both for and against exempting savings from the income-tax.
283. Explain the conditions which should be observed in imposing taxes on commodities.
284. What taxes does a tradesman get back in the price of the articles he sells, and what does he not?
285. Test by Adam Smith’s four maxims of taxation the policy of indirect taxes on the necessaries of life.
286. All indirect taxation violates Adam Smith’s fourth canon.
287. Discuss the following: “A man with $100,000 in United States bonds comes to Boston, hires a house...; thus he lives in luxury...I am in favor of taxing idle investments such as this, and allowing manufacturing investments to go untaxed.”
288. Compare the advantages and disadvantages of direct and indirect taxation.
289. On what principles is this country now taxed?
290. Explain the arguments for and against the policy of maintaining a surplus for the purpose of redeeming a national debt.
291. In estimating the ability of the United States to pay its public debts, it is usual to include among the data of the question the increased productiveness of industry in that country. How far is this a pertinent consideration?
PROTECTION.
292. Mention some of the principal arguments brought forward in favor of protective tariffs.
293. Connect the principle of the division of employments (or labor) with the policy of free trade and the functions of government.
294. Sketch the effects of discriminating duties, including the operation of the corn laws.
295. Examine the following argument, emending, if you think it necessary, the free-trader’s doctrine on the point raised: The free-trader’s belief is that a customs duty is added to the price of the article upon which it is imposed. If the article is imported, according to his theory, the increase of the price goes into the public treasury; if the article is made in the country, the increase of the price goes into the pocket of the producer. But in the former case there is no protection; and competition will prevent the latter. Therefore protection does not increase the price of the protected article. If a customs duty is imposed upon a commodity, and its price is not raised in consequence, what inference can you draw?
296. Under what circumstances did Mr. Mill think nascent states might be justified in adopting a policy of protection? Criticise his opinion, and, if you agree with it, give some examples of its application.
297. American protectionists allege that the high rate of wages prevailing in the United States disables them from competing with “the pauper labor” of Europe. Examine the grounds of this statement, and consider how far it forms a justification for protection to American industry.
298. A high rate of wages indicates, not a high, but a low cost of production for all commodities measured in which the rate of wages is high.
Explain and prove this proposition, and illustrate it from the circumstances of the United States.
299. State under what limitations the proposition is correct, that profits vary inversely with wages. Explain the circumstances which cause both a higher rate of wages and profits to prevail in a young country, such as the United States, than in England.
300. In America wages are much higher than in England, yet the general rate of profits is higher also, according to Mr. Mill. How do you reconcile the two facts?
301. Examine the following: “It seems to me that protection is absolutely essential to the encouragement of capital, and equally necessary for the protection of the American laborer...He must have good food, enough of it, good clothing, school-houses for his children, comforts for his home, and a fair chance to improve his condition. To this end I would protect him against competition with the half-paid laborers of European 302. An American newspaper has said of the burning of Chicago: “The money to replace what has been burned will not be sent abroad to enrich foreign manufacturers; but, thanks to the wise policy of protection which has built up American industries, it will stimulate our own manufactures, set our mills running faster, and give employment to thousands of idle working-men.” Comment on this passage.
303. On whom does a tax on imports, if not prohibitory, fall?
304. In what cases would duties on imported commodities fall on the producers?
305. Are taxes on imports in any way paid by foreigners?
306. Discuss the effects of duties on exports.
307. Trace the effects of duties on the importation of raw materials, and distinguish, with examples, between duties that violate and duties which do not violate the principle of free trade.
308. Is it possible for any country by legislative enactments to engross a larger share of the advantages of foreign trade than it would naturally have? Discuss the question fully.
309. “Those are, therefore, in the right who maintain that taxes on imports are partly paid by foreigners; but they are mistaken when they say it is by the foreign producer. It is not on the person from whom we buy, but on all those who buy from us, that a portion of our customs duties spontaneously falls.” Explain and examine the reasons for this conclusion.
310. State the principle which determines the relation between the amount of a country’s imports and that of its exports, and show how this relation is affected by a system of protective duties.
THE END.
ADVERTISEMENTS.
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CHARTS.
Chart XII. Fluctuations in the Price of Gold, from January 1st 1862, to December, 1865.
Chart XVIII. Graphical Presentation of the Comparative Areas of the States and Territories of the United States and the Countries of Europe, omitting Russia and Alaska.
Chart XIX. Giving the actual figures, compiled from the accounts of two Cotton-Mills in New England by Edward Atkinson, of Wages, Cost of Labor, etc., from 1830 to 1884, working on Standard Sheetings, No. 14 yarn.
Chart XX. Comparison of 1840 with 1883-1884, of the Relations of Labor and Capital in the same Mills.
Chart XXI Part 1.
Chart XXI Part 2.
Chart XXII. Outstanding Principal Of The Public Debt From 1791 To 1881.
FOOTNOTES 1 Yet Blanqui diffusively gives nearly one half of his “History of Political Economy” to the period before the sixteenth century, when politico-economic laws had not yet been recognized. A. L. Perry, “Political Economy” (eighteenth edition, 1883), also devotes thirty-five out of eighty-seven pages to the period in which there was no systematic study of political economy.
2 Xenophon, “Means of increasing the Revenues of Attika,” ch. ix; also see his “Economics;” and Aristotle, “Politics,” b. i, ch. vi, b.
iii, ch. i.
4 Roscher exhumed this book, entitled “De Origine, Natura, Jure et Mutationibus Monetarum,” and it was reprinted in 1864 by Wolowski at Paris, together with the treatise of Copernicus, “De Monetae Cudendae Ratione.”
5 Sermon at St. Paul’s Cross, 1549 (also see Jacob, “On the Precious 6 1530-1596. See II. Baudrillart’s “J. Bodin et son temps” (Paris, 1853). Bodin wrote “Réponse aux paradoxes de M. de Malestroit touchant l’enchérissement de toutes les choses et des monnaies” (1568), and “Discours sur le rehaussement et la diminution des monnaies” (1578).
7 “A Briefe Conceipte of English Policy” (1581). The book was published under the initials “W. S.,” and was long regarded as the production of Shakespere.
8 For information on this as well as a later period, consult Jacob “On the Precious Metals” (1832), a history of the production and influences of gold and silver from the earliest times. He is considered a very high authority. Humboldt’s “Essay on New Spain” gives estimates and facts on the production of the precious metals in America. A very excellent study has been made by Levasseur in his “Histoire des classes ouvrières en France jusqu’à la Révolution.”
For pauperism and its history, Nicholl’s “History of the Poor Laws” is, of course, to be consulted.
10 See Antonio Serra, “Breve Trattato delle Cause che possono fare abbondare li Regni d’ Oro e d’ Argento,” Naples, 1613.
11 Thomas Mun, “England’s Treasure by Foreign Trade” (published in 1640 and 1664); “Advice of the Council of Trade” (1660), in Lord Overstone’s “Select Tracts on Money”; Sir William Petty, “Political Arithmetic,” etc. (about 1680); Sir Josiah Child, “New Discourse of Davenant’s Works (1690-1711); Joshua Gee, “Trade and Navigation of Great Britain” (1730); Sir Matthew Decker (according to McCulloch, William Richardson), “Essay on the Causes of the Decline of Foreign Trade” (1744); Sir James Steuart, “An Inquiry into the Principles of Political Economy” (1767). For this period also consult Anderson’s (1803), and Lord Sheffield’s “Observations on the Commerce of the 12 The English Navigation Act of 1651 is usually described as the cause of the decline of Dutch shipping. The taxation necessitated by her wars is rather the cause, as history shows it to us. Sir Josiah Child (1668 and 1690) speaks of a serious depression in English commerce, and says the low rate of interest among the Dutch hurts the English trade. This does not show that the acts greatly aided English shipping. Moreover, Gee, a determined partisan of the mercantile theory, says, in 1730, that the ship-trade was languishing. Sir Matthew Decker (1744) confirms Gee’s impressions.
It looks very much as if the commercial supremacy of England was acquired by internal causes, and in spite of her navigation acts.
The anonymous author of “Britannia Languens” confirms this view.
13 This was, in substance, the whole teaching of one of the leading and most intelligent writers, Sir James Steuart (1767), “Principles of Political Economy.” See also Held’s “Carey’s Socialwissenschaft und das Merkantilsystem” (1866), which places Carey among the mercantilists.
14 Forbonnais, “Récherches sur les finances de la France” (1595-1721); Pierre Clément, “Histoire de Colbert et de son administration” (1874); “Lettres, instructions et mémoires de Colbert” (1861-1870); “Histoire du système protecteur en France” (1854); Martin, “Histoire de France,” tome xiii.
17 When Quesnay was sixty-one years old he wrote the article, “Fermiers,” in the “Encyclopædia” (of Diderot and D’Alembert) in 1758; “Maximes générales du gouvernement économique d’un royaume”; “Problème économique”; “Dialogues sur le commerce et sur les travaux économistes,” edited by E. Daire (1846), is a collection containing the works of Quesnay, Turgot, and Dupont de Nemours. See also Lavergne, “Les économistes françaises du 18e siècle” (1870); and H.
Koran of the school.
18 From χράτησις τῆς φύσεως, as indicating a reverence for natural laws.
19 The words were not invented by Quesnay, but formed the phrase of a merchant, Legendre, in addressing Colbert; although it was later ascribed, as by Perry, “Political Economy” (p. 46), and Cossa (p.
150), to one of the Economists, Gournay. (See Wolowski, in his Essay prefixed to “Roscher’s Political Economy,” p. 36, American translation.)
20 The Margrave Karl Friedrich was the author of “Abrégé des principes de l’économie politique” (1775), and applied the physiocratic system of taxation to two of his villages with disastrous results.
21 He published a first work on “Population” (1756); the “Théorie de work Mirabeau adopted the “Tableau économique” as the key to the subject, and classed it with the discovery of printing and of money.
22 In 1742 Turgot, when scarcely twenty, appeared as a sound writer on Paper Money in letters to Abbé Cicé. The physiocratic doctrines were presented in a more intelligible form in his greater work, “Réflexions sur la formation et la distribution des richesses” (1766). Three works of Turgot, on mining property, interest of money, and freedom in the corn-trade, bear a high reputation. For works treating of Turgot, see Batbie, “Turgot, philosophe, économiste et administrateur” (1861); Mastier, “Turgot, sa vie et sa doctrine” (1861); Tissot, “Turgot, sa vie, son administration et ses ouvrages” (1862).
23 He was the editor of the works of Quesnay and Turgot, and wrote a “Mémoire de Turgot” (1817). He opposed the issue of assignats during the French Revolution, and, falling into disfavor, he barely escaped the scaffold. Having been a correspondent of Jefferson’s, when Napoleon returned from Elba, he came to America, and settled in Delaware, where he died in 1817. The connection between the Economists and the framers of our Constitution is interesting, because it explains some peculiarities introduced into our system of taxation in that document. The only direct taxes recognized by the Supreme Court under our Constitution are the poll and land taxes; and it is in this connection that the constitutionality of the income-tax (a direct tax) is doubted.
24 One of the earliest is that of Roger Coke (1675), in which he argues for free trade, and attacks the navigation acts. Sir Dudley North’s “Discourse on Trade” (1691) urges that the whole world, as regards trade, is but one people, and explains that money is only merchandise.
25 Joseph Harris, an official in the London Mint, published a very clear exposition of this subject in his “Essay upon Money and Coins” (1757); but, eighty years before, Rice Vaughan had given a satisfactory statement in his “Treatise of Money.”
Smith had quoted Cantillon on his discussion of the wages of labor, b. i, ch. viii, and evidently knew his book.
27 Born in 1723, and died 1790; he was eleven years younger than Hume.
A Professor of Logic (1751) and Moral Philosophy (1752) at Glasgow, he published a treatise on ethical philosophy, entitled the “Theory of Moral Sentiments” (1739). Dugald Stewart is the authority as to Smith’s life, having received information from a contemporary of Smith’s, Professor Miller (see Playfair’s edition of Smith’s works); for Adam Smith destroyed all his own papers in his last illness. His lectures on political economy at Glasgow outlined the results as they appeared in the “Wealth of Nations”; it was not until 1764 that he resigned his professorship, and spent two years on the Continent (twelve months of this in France). On his return home he immured himself for ten years of quiet study, and published the “Wealth of Nations” in 1776. (See also McCulloch’s introduction to his edition of the “Wealth of Nations,” and Bagehot’s “Economic Studies,” iii.)
28 A glance at Sir James Steuart’s treatise (1767) with the “Wealth of Nations” shows Adam Smith’s great qualities; the former was a series of detached essays, although of wide range, but admittedly without any consistent plan.
29 (_a_.) He went into a vague discussion upon labor as a measure of value. (_b_.) A legal rate of interest received his support, and his argument was answered effectually by Bentham (“Defense of Usury”).
(_c_.) While not agreeing with the French school that agriculture is the only industry producing more than it consumes, and so land pays rent, yet he thinks that it produces more in proportion to the labor than other industries; that manufactures came next; and exportation and commerce after them. This error, however, did not modify his more important conclusions. Thorold Rogers and even Chevalier, however, claim that Adam Smith drew his inspiration from the French school. (_d_.) In the discussion of rent, he failed to follow out his ideas to a legitimate end, and did not get at the true doctrine.
While hinting at the right connection between price and rent, he yet believed that rent formed a part of price. Of the fundamental principle in the doctrine of rent, the law of diminishing returns, he had no full knowledge, but came very close to it. He points out that in colonies, when the good soil has all been occupied, profits fall. (_e_.) In saying that every animal naturally multiplies in proportion to, and is limited by, the means of subsistence, Adam Smith just missed Malthus’s law of population. In fact, Cantillon came quite as near it.
Book III in his “Wealth of Nations” is concerned with the policy of Europe in encouraging commerce at the expense of agriculture, and has less interest for us. Book V considers the revenue of the sovereign, and much of it is now obsolete; but his discussion of taxation is still highly important.
30 Among the English Liberals carried away by the French Revolution, and by such theories as those of Condorcet, was William Godwin, the author of “Political Justice” (1793) and the “Inquirer” (1797), who advocated the abolition of government and even marriage, since by the universal practice of the golden rule there would come about a lengthening of life. Malthus tells us that his study was brought forward as an answer to the doctrines of the “Inquirer,” and he applied his principles to Condorcet’s and Godwin’s ideas. It was a period when pauperism demanded attention from all. Malthus favored the repeal of the old poor-laws, as destroying independence of character among the poor.
Malthus also wrote “Principles of Political Economy” (1821) and “Definitions in Political Economy” (1827), but the former did not increase his reputation. He believed in taxing imported corn, and he gave in his adherence to the doctrine of over-production. But, on the other hand, he was one of several writers who, almost at the same time, discovered the true theory of rent. His father was a friend of Godwin, and a correspondent of Rousseau. (See Bagehot, 31 See Cairnes, “Logical Method,” Lecture VII, for the best modern statement of the question. Also, Roscher, “Principles of Political Economy,” b. v, whose extended notes furnish information on facts and as to books. H. Carey, “Social Science” (edition of 1877), iii, pp. 263-312, opposes the doctrine, as also Bowen, “American Political Economy” (1870), ch. viii, and Henry George, “Progress and 32 J. Anderson, “An Inquiry into the Nature of the Corn Laws” (1777), “Essay on the Application of Capital to Land” (1815); Rev. T. R.
Malthus, “An Inquiry into the Nature and Progress of Rent” (1815).
The last two appeared after Anderson’s discoveries had been forgotten, but he has the honor of first discovery.
33 Born in 1772 of Jewish parentage, Ricardo died in 1824. A rich banker, who made a fortune on the Stock Exchange, he early in life retired from business. The discussions on the Restriction Act and the corn laws led him to investigate the laws governing the subjects of money and rent. He gained notice first by his “Letters on the High Price of Bullion” (1810). The “Reply to Mr. Bosanquet” (1811), and “Inquiry into Rent” (1815), were followed by his greater work, “Principles of Political Economy and Taxation” (1817). He entered the House of Commons from Portarlington, a pocket borough in Ireland, and was influential in the discussions on resumption.
Although he was not on the committee, his views on depreciated paper are practically embodied in the famous “Bullion Report” (1810).
Tooke, “History of Prices,” says the results of the restriction were not known until the time of Ricardo’s contributions. Neither Mill nor Say has had so great an influence as Ricardo has gained, through the pages of his “Political Economy.”
34 Johann Heinrich von Thünen, a rich land-owner of Mecklenburg, in his “Der isolirte Staat in Beziehung auf Landwirthschaft und National-Oekonomie” (1826), worked entirely by himself, but reached practically the same law of rent as Ricardo’s. In spreading the doctrines of Adam Smith he has influenced later German writers.
35 The first distinct recognition of this important physical law, according to McCulloch (Introduction to “Wealth of Nations,” lv), was in a fanciful work of two volumes, entitled “Principes de tout gouvernement,” published in 1766: “Quand les cultivateurs, devenus nombreux, auront défriché toutes les bonnes terres; par leur augmentation successive, et par la continuité du défrichement, il se trouvera un point ou il sera plus avantageux à un nouveau colon de prendre à ferme des terres fécondes, que d’en défricher de nouvelles beaucoup moins bonnes” (I, p. 126). The author was, however, unaware of the importance of his discovery.
Political Economy” (ch. ix), have denied Ricardo’s doctrine of rent.
Thesupposed connection between free trade and Ricardo’s teachings on rent has prejudiced protectionists against him. Free trade follows from the theory of international trade, and has nothing to do with Ricardo’s main doctrines. It is true, Ricardo was a vigorous free-trader. Of opposing views on rent, Carey’s argument is the most important.
37 Say drew considerable attention by his theory of “gluts.” He based his idea of value wholly on _utility_, which has lately been taken up again by Professor Jevons. Say was answered on this point by Ricardo in a later edition of his “Political Economy.” See Cairnes, governmental interference, he went further than his master, Adam Smith. Napoleon did not like this part of Say’s teaching, saying that it would destroy an empire of adamant, and tried to induce him to modify his position, but in vain. The second edition was not allowed to be published until 1815.
38 Educated at Bologna, he went to Geneva in 1816, and was called (1833) by the French Government to succeed Say in the Collége de France. In 1845 he was sent as minister to Rome, led the revolutionary movement there, and was assassinated in 1848. His lectures were taken down in short-hand by one of his disciples, Porée, and later published.
39 Malthus, who held that the unproductive consumption of the rich was