LIBRARY
UNIVERSITY OF CALIFORNIA.
Deceived JAN 16 1893 .189,
Accessions No. 'Satr.5~J . Class No.
PROBLEMS
IN
POLITICAL ECONOMY
BY
WILLIAM GRAHAM SUMNER
II
PROFESSOR OF POLITICAL AND SOCIAL SCIENCE IN YALE COLLBCZ
NEW YORK
HENRY HOLT AND COMPANY
1889
TNOW8
AND BOOKBINDING COMPANY,
NEW YORK.
CONTENTS.
PREFACE, - . - ~ . v
LIST OF BOOKS, - vii
1. GENERAL DEFINITIONS, ... i
2. ELEMENTARY PRINCIPLES, - 9
3. POPULATION, - 23
4. LAND AND RENT, * - - - - 26
5. WAGES, - - 31
6. CONSUMPTION, 50
7. MONEY, CURRENCY, AND BANKING, - - 58
8. INTERNATIONAL EXCHANGES, - 83
9. ECONOMIC POLICY: SOCIALISM, ADJUSTMENT OF RIGHTS,
ETC., 89
10. ECONOMIC POLICY: PUBLIC FINANCE, - - 105
11. ECONOMIC POLICY: TAXATION, - - 108
12. ECONOMIC POLICY: PROTECTIONISM, * 112
PREFACE.
When I began to make this collection of problems I intended to
make only a small pamphlet for use in my own class-room. The
enterprise has grown, however, until it has seemed better to make
a book and publish it. Hence a few words of explanation are
here needed.
I have long used problems and fallacies as auxiliary to my
other class-room work. The object of such exercises is to break
up the routine of text-book recitations, to encourage wider study
of scientific treatises, and to develop some independent power of
thinking, and of applying the principles which have been learned.
In the present state of political economy it seems especially
desirable to study subjects, and not text-books. These problems
are intended to bring forward the subjects or topics which should
be studied, and to guide the student to an investigation of them
with the aid of the teacher, and by the use of the leading treatises
in the science. The problems are, in their form, almost all " lead-
ing," and effort has been made to put them in such a way that a
student who has already studied an elementary text-book can
dea! with them. When possible, they have been put in that form
in which they present themselves in practice. My aim has been
to limit the references as much as possible in number, and to con-
centrate them on the following books : Rogers's Adam Smith,
Mill's Principles, Jevons' Theory, Marshall's Economics of In-
dustry, Cairnes's Principles, Walker's Political Economy, and
Cossa's Guide. A " Loan Library of Political Economy" has
been formed as a part of the scheme, from which each student can
obtain a copy of each of the above books for use so long as he
desires. I have found, however, that, if the problems were to
VI PREFACE.
have any range and variety, I must enlarge the range of the refer-
ences far beyond my original intention. I give below a list of all
the books to which reference is made under the problems. The
library will contain these in numbers proportioned to their use-
fulness.
While I was at work on these problems Milnes' collection of
2,000 questions and problems from English examination papers
was published. I have to acknowledge my obligations to that
collection. I have borrowed some problems from it; others I have
adapted. They are marked by an M. with the number in Milnes'
collection, thus : (M. 100). Many have been suggested to me by
reading that collection. I have given credit whenever the sug-
gestion was so close that I could specify the question in Milnes'
collection which suggested mine. This was not always possible,
and so the present general acknowledgment must cover the rest.
The problems here given are of very unequal difficulty and im-
portance. A primary classification is made by printing the num-
bers of those which I should reserve for examination at a later
stage of study with thin faced numerals.
I am indebted to Prof. H. W. Farnam and Mr. Arthur Hadley
for valuable aid and suggestions.
W. G. S.
YALE COLLEGE, December, 1883.
FULL TITLES OF BOOKS CITED.
Accounts and Papers, Session [Parliament] 1868-9, v l- 35. (Pub-
lic Finances since 1688).
Baden-Powell, State Aid and State Interference. Chapman &
Hall, 1882.
Bagehot, Lombard Street. Scribner, Armstrong & Co., 1873.
Banker's Magazine. New York.
Brodrick, English Land and English Landlords. Cassel & Co.,
1881.
Cairnes, Logical Method of Political Economy. Macmillan, 1875.
Cairnes, Some Principles of Political Economy. Harpers.
Cairnes, Essays in Political Economy, Theoretical and Applied.
Macmillan, 1873.
Chevalier, ticonomie Polilique. Paris, 1866.
Chevalier, On Gold (Translated). Appleton, 1859.
Cossa, Guide to the Study of Political Economy (Translated).
Macmillan, 1880.
Crump, English Manual of Banking. Longmans, 1877.
Cunningham, Growth of English Industry and Commerce. Cam-
bridge, University Press, 1882.
DeBroglie, Le Libre ^change et L Impot. Paris, 1879.
DeLavelaye, Primitive Property (Translated). Macmillan, 1878.
Dictionnaire de T Economic Polilique. Guillaumin, 1854.
Fawcett, Political Economy, 6th Ed. Macmillan, 1883.
Fawcett, Pauperism. Macmillan, 1871.
Fawcett, Free Trade and Protection. Macmillan, 1878.
Ford, American Citizen's Manual. Putnam, 1883.
Giffen, Essays in Finance. Geo. Bell & Sons, 1880.
Gilbart, The Principles and Practice of Banking. Bell & Daldy,
1871.
Vlll REFERENCES.
Goschen, Theory of the Foreign Exchanges. E. Wilson, 1875.
Grant, Recess Studies. Edmonston & Douglas, Edinburgh, 1870.
Hankey, The Principles of Banking. Effingham Wilson, 1873.
Hertzka, Wahrung und Handel. Wien, 1876.
Holyoake, History of Cooperation in England. Lippincott, 1875.
Horton, Silver and Gold. R. Clarke & Co., 1876.
Humboldt, Sphere and Duties of Government. London, 1854.
Hamilton. National Debt of Great Britain. Carey, 1816.
Jevons, Theory of Political Economy. Macmillan, 1879.
Jevons, Money and the Mechanism of Exchange. Appleton, 1875.
Jevons, The Coal Question. Macmillan, 1866.
Jevons, Methods of Social Reform. Macmillan, 1883.
Lalor, Cyclopedia of Political Science, etc. Rand, McNally & Co.,
1882.
Leroy-Beaulieu, Science des Finances. Guillaumin, 1877.
Letourneau, Sociology (Translated). Chapman & Hall, 1881.
Levi, History of British Commerce. Murray, 1880.
Macleod, Principles of Economical Philosophy. Longmans. 1872.
Macleod, Dictionary of Political Economy. Longmans, 1863.
Maine, Village Communities. Holt, 1871.
Mann, Paper Money. Appleton, 1872.
Marshall, Economics of Industry. Macmillan, 1879.
Martineau, History of England. Boston, 1865.
McCulloch's Adam Smith. Longmans, 1838.
Mill, Political Economy. Longmans, 1878.
Mill, Logic. Harpers, 1870.
Mill, Liberty. Longmans, 1865.
Milnes, Problems in Political Economy. Sonnenschein, 1882.
Molesworth, History of England. Chapman & Hall, 1874.
Mongredien, History of the Free Trade Movement in England.
Cassell & Co.
Mongredien, Wealth Creation. Cassell & Co., 1882.
Price, Practical Political Economy. Kegan Paul & Co., 1878.
Princeton Review, November, 1879, Bimetalism.
Princeton Review, March, 1881, The Argument Against Protec-
tive Taxes.
Princeton Review, November, 1881, Sociology.
REFERENCES. ix
Princeton Review, November, 1882, Wages.
Probyn, Systems of Land Tenure in Various Countries. Cassell
,V: Co.
Ricardo, Works, Edited by McCulloch. Murray, 1881.
Richardson, H. A., National Banks. Harpers.
Richardson, W. A., Public Debt and National Banking Laws of
the United States. Washington, 1873.
Rogers, History of Agriculture and Prices in England. Claren-
don Press, 1866.
Roscher, Political Economy (translated). Holt, 1878.
Say, Rapport stir le Payement de I" Indemnite de Guerre, in his
Translation of Goschen, Theorie des Changes. Guillaumin,
1875-
Seebohm, The English Village Community. Longmans, 1883.
Seybert, Statistical Annals. Philadelphia, 1818.
Seyd on Bullion and Foreign Exchanges. Effingham Wilson,
1868.
Sidgwick, Principles of Political Economy. Macmillan, 1883.
Smith, Adam, Wealth of Nations, edited by Rogers. Clarendon
Press, 1880.
Smith, Adam, edited by McCulloch, see McCulloch.
Soetbeer, PetermamJs Mittheilungen, Erganzungshefl, Nr. 57,
Edelmeiall-produktion. Gotha, 1879.
Spencer, Study of Sociology. Appleton, 1874.
Spencer, Principles of Sociology. Appleton, 1883.
Spencer, Biology. Appleton. 1874.
Spencer, Social Statics. Appleton, 1863.
Spencer, Essays, Moral, Political and Esthetic. Appleton, 1872.
Sumner, Life of Jackson. Houghton, Mifflin & Co., 1882.
Sumner, Argument before the Tariff Commission, 1882.
Sumner, History of Protection in the United States. Putnam.
Sumner, What Social Classes Owe to Each Other. Harpers, 1883.
Sumner, see " Princeton Review."
Thornton, On Labor. Macmillan, 1870.
Walker, Political Economy. Holt, 1883.
Walker, Money. Holt, 1878.
Walker, Money, Trade and Industry. Holt, 1879.
X REFERENCES.
Walker, Land and its Rent. Little & Brown, 1883.
Wallace, Russia. Holt, 1877.
Walras, Elements <? ficonomie Politique Pure. Lausanne, 1874.
Ward, Dynamic Sociology. Appleton, 1883.
Wilson, The National Budget. Macmillan, 1882.
Woolsey, Political Science ; or, The State. Scribner, Armstrong
& Co., 1878.
ADDED 1885.
Connell. The Economic Revolution of India. Kegan Paul, 1883.
Frohme, Die Entwickelung der EigenthumsverhcUtnisse. Bocken-
heim, 1883.
Le Touze, Traitd du Change. Guillaumin, 1883.
Le Play, La Reforme Sociale en France. Dentu, 1878.
Pollock, The Land Laws. Macmillan, 1883.
Rae, Contemporary Socialism. Scribners, 1884.
Rogers, Work and Wages. Putnams, 1884.
Taylor, Profit-sharing. Kegan Paul, 1884.
TJHI7BRSIT7
ECONOMIC PROBLEMS.
1.
GENERAL DEFINITIONS.
1. Discuss the following definitions of political
economy : It is the science of value.
It is the science of exchanges.
It is the science which treats of the production,
exchange and distribution of wealth.
Political economy, or economics, is the name
of that body of knowledge which relates to
wealth.
Political economy is the science which investi-
gates the laws of the material welfare of human
societies.
Cairnes, Logical Method, 57.
2. Is political economy not a science (i) be-
cause, as is alleged, it cannot predict economic
phenomena ; (2) because, as is alleged, it has not
won a body of positive and ascertained results ?
What is a science? or what is the essential con-
dition that any discipline may become a science?
Marshall, 2.
2 ECONOMIC PROBLEMS.
3. Sociology is the science of life in society.
Political economy is that branch of sociology
which treats of the industrial organization of
society. Expand the notion and definition of
sociology and explain what that conception of
political economy is which is here presented.
4. Price says that it is silly to call political
economy a science ; that supply and demand, the
law of population, etc., are only familiar facts of
intelligent observation. Per contra, he affirms
that political economy is " the application of
common sense to familiar processes. It explains
their nature and manner of working. It analyzes
and thinks out practices which are universal ex-
cept when thwarted by artificial theory." Criti-
cise this view of political economy as antithetical
to the notion of a science. What is it to think out
a practice? What is a practice which would be
universal, if not thwarted? What is an artificial
theory ? How can a theory thwart a practice ?
Price, 10-15.
5. Wealth is any material good which satisfies
a desire of man, and which is not gratuitous. It
is used as a collective term, for the general con-
ception of such goods, and, when it describes the
subject or aim of political economy, it carries
with it the notion of abundance. Criticise and
GENERAL DEFINITIONS. 3
correct this definition. Do you include in your
definition the following? Honesty, health, skill,
" the moral, intellectual, and physical natures" of
the people, a patent right, a copy-right, a bill of
exchange, the voice of a singer, a good harbor,
climate, and sunlight. Do you infer, for instance
from Price's discussion, that economists need not
continue the effort to formulate a satisfactory
definition of wealth ?
Price, 23-30. Marshall, 6. Sidgwick, Chap. III.
Adam Smith, I., i, Rogers's note.
6. If a census were taken of the wealth of the
country ought the owners of land to return it at
its market value? Is the land a part of the
national wealth ? Ought the owners of govern-
ment bonds to include them in the return? If
they did so, and if the returns were added up, the
national debt would be counted into the sum of
the national wealth. Would that be right? If
A sells to B a bale of cotton for $500 and B gives
a promissory note for it, ought B to return the
cotton and A the note ? If A has a certificate of
stock in a railroad, ought the railroad officers to
return the railroad and ought A to return the
stock?
Adam Smith, I., 254, Rogers's note.
7. " Because political economy confines itself
to discovering the laws of wealth, it has, by some,
4 ECONOMIC PROBLEMS.
been called derisively, the gospel of mammon.
In reply to this sneer it would be enough to say
that, while wealth is not the sole interest of man-
kind, perhaps not the highest interest, it is yet of
vast concern, of vital concern to individuals and
to communities. As such it deserves to be
studied. Now, if it is to be studied at all, it will
best be studied by itself." Vindicate in detail
this view of political economy and show the rela-
tion of political economy to other interests.
Walker, Pol. EC., I, 2.
8. If there should be a scarcity of houses in the
city of Washington this winter, would that fact
constitute a problem requiring the attention of
the economists of the country? How does your
answer bear on the sphere of political economy
and the opinions of the professorial socialists ?
9. It has been said that the free play of eco-
nomic forces would produce, not the best con-
ceivable, but the worst conceivable, state of
society. Show the absurdity of this statement.
10. What are economic forces? What are
economic laws? Are economic laws subject to
exceptions like laws of grammar? Are eco-
nomic laws like the ten commandments ? Are
they like Acts of Congress? Are they like laws
GENERAL DEFINITIONS. 5
of physics? Can we "violate" them? What is
the limit of what we can do with economic forces ?
If economic laws are described as expressing- a
"tendency," what is meant? What objection is
there to that description of them ?
Marshall, 3. Cairnes, Logical Method, 18.
Cairnes, Principles, 184. Mill's Logic, Book III., Chap. 10, 5.
Cossa, 7. Sidgwick, 24. Spencer, Study of Sociology, 22.
11. A writer who ridicules the notion of
natural or scientific laws in political economy
cites " property" as a proof that no such laws
exist. Show the fallacy.
12. Distinguish between the science and art
of political economy ; between political economy
and politics.
Walker, Pol. Econ., 20-22. Cossa, 6, 11-13.
13. Is it a valid distinction to say that the
science of political economy investigates what is ;
the art, what ought to be ?
Sidgwick, 23-26, also 402.
14. Does the art of political economy mean,
or include, the art of getting rich, or the art of
conducting business, or the art of speculation, or
the art of investing capital in stocks, bonds, lands,
etc., or the art of conducting the finances of a
nation, or the art of legislating on trade, in-
6 ECONOMIC PROBLEMS.
dustry, and finance ? Give reasons for including
or excluding each of these things.
15. Is political economy a "moral" science?
If so, according to what classification of the
sciences is it so classed? and what is meant by so
denominating it ?
Cairnes, Logical Method, 31, 37.
16. Is political economy a deductive or an in-
ductive science? What difference does it make
which it is
Cairnes, Logical Method, 60 fg. Sidgwick, Chap. III.
17. Is imagination a force in political econ-
omy? If so, give all the illustrations you can.
Discuss delusion, fraud, falsehood, prejudice,
habit, tradition, patriotism and affection, so far
as you think that an economist ought to take
account of them.
Ought there to be any difference in a text-
book of political economy for an English college
and for a college in India?
Walker, Polit. Econ., 23.
Connell, 11-22; 50; 148-9.
18. If it is said: "Some people struggle to
keep up false appearances of wealth and so ruin
themselves," do you think that that is such an
observation as an economist should take account
of? If it is said: " Many people waste their capi-
GENERAL DEFINITIONS. 7
tal by extravagant expenditure," do you think
that that is an observation of which an economist
should take account?
19. Do you think, as a matter of fact, that
most people actually distribute their incomes in
their expenditure so as to get the maximum of
utility for themselves, judging by such standards
of utility as they would admit to be sound when
discussing the question of what things are useful
abstractly ? If there are many who do not do so,
does that present a fact which the economist
ought to take note of in his discussions?
Jevons, Theory, 77-80; 149-153.
20. Do you believe that there are crafty and
able men who can " rig the market" and bull and
bear prices more or less at their pleasure? Men-
tion commodities with which this might be more
possible than with others. Is it possible with
stocks? If so, why? What should you say of
such interferences on the whole and over a con-
siderable period of time ? Is the popular opinion
correct about the extent to which manipulation
of the market is possible?
Banker's Magazine, XXXVI., 308.
21. Was it the fundamental doctrine of the
mercantile system that the precious metals are
8 ECONOMIC PROBLEMS.
wealth exclusively or preeminently? If not,
what was the fundamental doctrine of that sys-
tem, and how was the doctrine just mentioned
derived from it? Describe the development of
the system.
Adam Smith, I., 15, Rogers's note ; II., 63, Rogers's note.
Cossa, 119, fg.
22. How was the colonial system a deduction
from the mercantile system ?
Adam Smith, II., 190-210.
23. Who were the Physiocrats and what did
they teach ?
Cossa, 142. Art. Physiocrates in the Dictionnaire de FEc. Pol.
24. Mention the leading English economists
from Smith to J. S. Mill, giving dates and the
chief contributions of each.
Cossa, 161-182. Life of Smith prefaced to Rogers's Smith.
II.
ELEMENTARY PRINCIPLES.
25. What is meant by a period of production?
Show the great importance of observing the
element of time in economic phenomena aud
correctly defining it in economic generalizations.
Jevons, Theory, 249-258.
26. What could supply and demand mean to
Robinson Crusoe? When, in history, did supply
and demand begin to act ?
Supply and demand, at their lowest terms, are
not a ratio, but a case of two simultaneous equa-
tions between two variables, or, they are repre-
sented by two curves which intersect. There
are two .persons and two commodities. Prove
this and show what errors must follow from treat-
ing supply and demand as a simple ratio.
How far can we analyze supply and demand ?
Is the equilibrium of supply and demand acci-
dental, imperfect, arbitrary, contingent, moral, or
mathematical?
Jevons, Theory, Chap. IV.
Jenkin in Grant's Recess Studies, 151-171.
Princeton Review, November, 1882, p. 249-50
10 ECONOMIC PROBLEMS.
27. Effort and satisfaction are the pulsations
by which the isolated man maintains existence.
So soon as society exists division of labor begins
and exchange follows. The systole and diastole
of supply and demand are the form which the
pulsations of effort and satisfaction take for a man
who lives in society. Hence supply and demand
are constant and all-pervading relations in society,
and demand the first and most careful study of
the economist.
Rights and obligations are the jurisprudential
aspect of the relations of supply and demand.
Expand and criticise.
28. The law of supply and demand, in a free
market without reserve, is that they come to an
equilibrium at the ratio of value which will clear
the market. Compare Mill's law of the equation
of international value and criticise the law here
stated.
Mill, III., 18, 4.
29. What is the difference between supply
and demand and reciprocal demand ?
Mill, III., 18, 4. Cairnes, Principles, 89.
30. Value is a fact, not an opinion. It there-
fore has conditions of time and place, and may
vary from moment to moment or place to place
ELEMENTARY PRINCIPLES. II
if successive sales take place. Expand, illustrate,
and establish, or refute, this statement.
31. "Value, economists are pretty much
agreed, is a relation ; and, for the purposes of the
present discussion, we may so take it." A few
pages further on: " Value is purchasing power ;
power in exchange." What further analysis is nec-
essary to make these two definitions consistent?
Walker, Money and Trade, 30, 36.
32. " Wheat is worth 24 francs the hectolitre.
This fact has the character of a natural fact.
This value of wheat, reckoned in silver, does not
result either from the will of the seller, or the
will of the buyer, or from an agreement between
them." " Wheat is worth 24 francs the hectolitre.
This is a mathematical fact. The value of wheat
in silver yesterday was 22 or 23 francs. A little
while ago it was 23^ or 23^. It will shortly be
24^ or 24^. But to-day, at this instant, it is
24 francs, neither more nor less. This is a math-
ematical fact and admits of mathematical expres-
sion." Explain and prove.
Walras, 29, 30.
33. If the supply of all commodities were
doubled or halved suddenly, would any changes
in their relative value ensue or not? (M. 774.)
Jevons, Theory, 160-174. Mill, IV., 3, 4.
12 ECONOMIC PROBLEMS.
34. On the Black Friday of 1869 gold was
sold on one side of the gold room for 160 when it
was being sold on the other side for 135. Those
on one side of the room knew a minute sooner
than those on the other side that the Secretary
of the Treasury had ordered five million dollars
gold to be sold, .adding so much to the supply.
How does this illustrate the doctrine of value?
Cf. question 30.
35. Is either one of the following things com-
mensurable ; if so, which? Cost, desire, utility,
satisfaction. What is "cost" according to
Cairnes ?
Cairnes, Principles, 73-87.
36. Why does not skill enter into cost? Is
the fact here analogous to the fact that the rent
of land does not enter into the price of agricul-
tural produce ?
Cairnes, Principles, 76-80.
37. Translate into English, prix de revient.
38. It is commonly said that value, in the long
run, conforms to "cost of production." Jevons
says: "I hold labor to be essentially variable, so
that its value must be determined by the value
KLKM i:\T.\RY PRINCIPLKS. 13
of the produce, not the value of the produce by
that of labor." " Labor once spent has no influ-
ence on the future value of any article." He
defines labor " all exertion of body or mind" by
which we get products, and he says that it is in-
commensurable. Cairnes defines " cost " as all
onerous exertion and sacrifice necessary to get
goods. Macleod denies that labor produces
value. He says that value produces or calls out
labor. Sidgwick objects to Cairnes's use of
"cost" that Cairnes spoke of the proportion of
cost of production, but that we cannot think of
" anything being in proportion to an aggregate
of incommensurables." Marshall recognizes two
uses of cost of production, adopts Cairnes's
notion, and proposes the term " expenses of pro-
duction" for the outlay, to which, as he and
others say, normal value must conform. Is
Sidgwick's objection valid ? Compare the above
views and say whether the two senses of cost of
production should be recognized, or, if only one,
which ?
Mill, III., ch. 3. Jevons, Theory, 174-189.
Sidgwick, 201. Macleod, Econ. Philos., I., 331.
39. Jevons says that " Labor once spent has
no influence on the future value of any article."
On the wages system, if the labor spent last
week was paid for by capital then consumed by
14 ECONOMIC PROBLEMS.
the laborer, can value to be received ever have
any effect back upon labor expended ? or value
be made to conform to capital formerly laid out?
If we say that we shall make a hew adjustment,
in the next period of production, if we fail to re-
place our capital, will not the next period of
production have all its own facts, circumstances
and relations, and be, in fact, a new and inde-
pendent problem ?
40. Cost of production is a comparison of
ratios. Cost is incommensurable, but the subject
of it compares the cost with the satisfaction
obtained. This ratio he cannot measure. It
could not be measured and compared for two
men, but the first man can compare the cost to
him and the satisfaction to him in one line with
the cost to him and the satisfaction to him in
another, and this is what is really essential and is
really done so long as two or more lines are
open. Hence cost of production redistributes
labor and capital and acts on supply ; so ulti-
mately on value. In no other way does it act on
value, which is controlled by supply and demand
only. Criticise this doctrine. Suppose that no
second line is open, and that the ratio of satisfac-
tion to effort falls, as when a laborer advanced in
life has to compete with a machine which lowers
the price of his product, what happens then? and
ELEMENTARY PRINCIPLES. 15
what becomes of the notion of cost of production
as an ultimate regulator of value? What light
does this last supposition throw on the last two
questions ?
41. "All other organs, therefore, jointly and
individually, compete for blood with each organ,
so that, though the welfare of each is indirectly
bound up with that of the rest, yet, directly,
each is antagonistic to the rest." " Evidently
this process [of enlargement of an industry or
development of a district whose products are in
unusual demand] in each social organ, as in each
individual organ, results from the tendency of
the units to absorb all they can from the common
stock of materials for sustentation ; and evidently
the resulting competition, not between units
simply, but between organs, causes in a society,
as in a living body, high nutrition and growth of
parts called into greatest activity by the require-
ments of the rest."
Explain the doctrine of the first sentence and
show how it applies to society. What light is
here thrown on competition as a mode of growth,
and on the general laws of life of which competi-
tion is one phase ?
Spencer's Principles of Sociology, I., 535-6,
l6 ECONOMIC PROBLEMS.
42. Criticise the expression "division of la-
bor." Explain social organization. Show that
division of labor is only a case of it. Show the
power and utility of organization. What is
proved in regard to the social and industrial
utility of concord and peace? What is the law
of the " Increasing Return?"
Marshall, Chap. VII., p. 57.
43. "Are the following to be included in capi-
tal? (i) the original powers of the laborer; (2)
his acquired powers ; (3) the original properties
of the soil; (4) improvements on land; (5) credit;
(6) unsold stock in the hands of a merchant ; (7)
articles purchased but still in the consumer's
hands." (M. 1 66.)
Jevons, Theory, 280-8. Sidgwick, 120-141.
44. The savings of the United States have
been estimated at 850 millions of dollars a year.
What sort of things are these savings and where
are they? (M. 177.)
Price, 113-14. Marshall, 15.
45. Capital is transmuted in every period of
production. Prove this. Show its relation to
" risk," and to any sound doctrine of wages.
Show that industry is limited by capital.
Mill, I., 5, i, 3, 5-
II KMKNTAKY PRINCIPLES. I/
46. The socialists declare that capital is pro-
duced (i) by accumulating the differences be-
tween buying price and selling price, i. e. the
profits of merchants, and (2) by accumulating the
differences between product and capital dis-
tributed to laborers. They regard the product
as due entirely to labor, and therefore denounce
the latter difference as an abstraction from the
laborer of what belongs to him. They therefore
construe the history of the last five hundred
years as a period in which the middle class has
developed itself by the accumulation of capital,
(i. e. the plunder of the proletariat) and the crea-
tion of a capitalist system of industry. They
construe civil liberty as the license given by the
state to the robbery mentioned, and denounce
competition as the mode in which the robbery is
accomplished.
State what facts in the industrial history of the
last five hundred years are here misconstrued,
show the misconstruction, and put the facts in
their true light.
Give an outline of the history of capital.
When did it begin to be?
Describe the modern industrial system as com-
pared with the system in England in the thir-
teenth century.
Cunningham, especially 139, 249. Seebohm.
Adam Smith, I., 273, Rogers's note. Walker, Land, 188.
Rogers, Work and Wages. Frohme. Rae, ch. III.
18 ECONOMIC PROBLEMS.
47. Mention as many natural monopolies as
you can. State when and why space, light, air,
and water have value. Do honesty and truth
have value? If so, why? Are natural monopo-
lies beneficent or maleficent to man? Illustrate.
48. If fresh meat has hitherto been wasted in
Australia and Buenos Ayres, and if refrigerator
ships can be constructed which can carry that
meat to Europe, what effects can you trace on
the prices of certain commodities, on the distri-
bution and increase of population, and on interna-
tional competition in industry as likely to be
produced?
Adam Smith, I., 245.
4:9. What is a speculator? Is he a parasite on
the commercial system? If he performs a ser-
vice, what is it? Is it a correct definition to say
that he is one who bets on variations in prices ?
Cairnes, Principles, 109. Adam Smith, II., 89 note ; 99.
Nation, VII., 85.
50. Can we ever become too rich? Has the
work to be done any limits? Is the work to be
done a positive quantity? Does it remain con-
stant ?
Cairnes, Principles, 249-262.
KLKMKXTARY PRINCIPLKS. 19
51. "As the washing of clothes is not a pro-
ductive industry, and its cost is one of the
charges of living, it is an object that it should
occasion as little drain upon the pecuniary re-
sources of the community as possible."
Criticise the distinction between productive
and unproductive labor.
52. Would it be a good state of things if no
man could be found who would black another
man's shoes for less than a dollar ? Suppose,
first, that all were proud and shiftless, and then
make other suppositions.
53. " Discuss -the effects of the exportation of
capital (i) from England, (2) from Ireland." (M.
219.)
54. Can you assign any meaning to " over-
production" in any case whatever.
Jevons, Theory, 219-221.
55. A cause of industrial depression was said
to be "that the power to consume has not kept
pace with the power to produce. It is not the
fault of the power of production, [i. e., it is not
over production.] It is a fault on the other
side."
20 ECONOMIC PROBLEMS.
If production should exceed consumption, what
would become of the difference ? If consumption
should exceed production, where would we get
the difference ?
Cairnes, Principles, 31-36.
56. What are the economic objections to gamb-
ling?
Cf. Jevons, 172-174. Spencer, Study of Sociology, 306.
57. In a certain city a piece of grading was
to be done. It was known and admitted that it
would cost 15 cents per cubic foot to do it by
contract and 45 cents per foot to do it by days
labor. Some favored doing it the latter way and
replied to the objection of greater cost that there
would be no loss or injury to the interest of the
city because the money would be paid to laborers
resident in the city, and so would stay there.
Show the fallacy of this reasoning.
58. Suppose that, in consequence of great re-
duction in the cost of transportation between the
United States and England, the gains of agricul-
ture in England should greatly decline, what
would be the successive stages of effect, and what
the ultimate effect on the wealth of England, and
why ? (M. 38.) What would be the effect in the
United States?
ELEMENTARY PRINCIPLES. 21
59. What is the value of the obelisk in the
Central Park? Its first cost to its modern owner
was o. It cost $100,000 to move it and set it up.
Jevons, Theory, 174-180.
60. A one dollar bank note is in circulation,
which is a counterfeit, but no one has detected it.
What is its value?
The promoters of a stock company, by puffing-
it in the newspapers, have run the stock up to
150. What is the value of it?
A false bottom was put into an elevator bin so
that it held 50 bushels when it was supposed to
hold 10,000. What was the effect on the market
price of wheat ? What was the value of wheat ?
A piece of cloth was sold for all wool for $1.00
a yard. It contained 10 per cent, cotton. What
was its value ?
A grocer tampered with his scales so that he
sold 15 ounces for a pound. He charged " 10 cts.
a pound" for sugar. What was the value of
sugar ?
61. A piece of land was owned by 15 persons.
Desiring to divide without selling it, they em-
ployed three real estate experts to divide it into
15 parts which should be of equal value. This
was done. The next year the tax assessors as-
22 ECONOMIC PROBLEMS.
sessed the 15 shares at amounts varying from
$900 to $2,850.
What lisrht does this incident throw on value ?
62. In 1870 a house was built which cost
$100,000. In 1876 it was appraised in an estate
at $75,000 because that was judged to be what it
would sell for. In 1880 it was sold for $150,000.
There were those who claimed in 1876 that it
should be appraised at what it cost in 1870, or at
what it would sell for in 1880 so far as they could
then foresee that. What do you say ?
63. What causes determine the market value
of oysters?
Cairnes, Principles, 141-146.
64. " Suppose a considerable rise in the price
of wool to be foreseen, how should farmers ex-
pect the prices of mutton, beef and hides, respec-
tively to be affected, and why ?' 4 (M. 868.)
65. The Dutch East India Co. used to destroy
part of the spice crop in order to enhance its
profits. Was there a fallacy in the proceeding ?
(M. 5470
Adam Smith, II., 101.
III.
POPULATION.
66. Population increases up to the limit of
the sustaining 1 power of the land at a given stage
of the arts and under a given standard of living,
or, mortality and reproduction are equal at the
limit, on a given stage of the arts, and with a
given standard of living. Explain and prove this
law.
Spencer, Biology, II., 479. Cairnes, Logical Method, 149-181.
Roscher, II., 273-336. Mill, I., ch. 10.
Fawcett, Pauperism, Chap. III.
67. What is over-population ? What is under-
population? British India has 200 to the square
mile; Belgium, 469; Rhode Island, 254. Which
comes nearer to over-population and which to
under-population ?
Roscher, II., 337-341.
68. How is the ratio Land : Population affec-
ted by advance in the arts and higher standard
of living ?
Adam Smith, I., 262.
24 ECONOMIC PROBLEMS.
69. The law of population and the law of the
diminishing return show that, other things being
constant, the human race, in the process of time,
must advance towards misery, pestilence, famine
and war. State in detail what " the other things"
are? Are they constant? If they vary, what
makes them do so? Define civilization from this
point of view. Show what produces civilization ;
what it consists of; what its effects are. Do any
of your facts or deductions bring out " excep-
tions" to the laws of population and the diminish-
ing return, or prove those laws untrue ?
Princeton Review, November, 1881, p. 303.
70. What is the importance for land rent,
wages, rate of interest, and so for the status of
the population, of the ratio Land : Population ?
What is the limit of that ratio ?
71. Make a complete catalogue of food-plants
and discuss their comparative economic value.
IV.
LAND AND RENT.
72. Discuss the following definitions of rent :
" Rent is that portion of the produce of the
earth which is paid to the landlord for the use of
the original and indestructible powers of the
soil."
Rent is the price paid for the use of an appro-
priated natural monopoly.
Ricardo, 34. Walker, 203. McCulloch's Adam Smith, 444.
Adam Smith, I., 151, Rogers's note.
73. State the law of the diminishing return.
Mention as many things as you can to which it
applies. Why do we find our population scat-
tered sparsely over our whole territory and not
concentrated on the Atlantic coast ? Why is
American agriculture slovenly? Why have our
agricultural colleges obtained few students of the
science of agriculture ? Why is forestry neg-
lected in the United States? Why are we not a
pains taking people? Why are we not frugal?
Marshall, 21-26. Walker, Land, 45-6.
' 25
26 ECONOMIC PROBLEMS.
74. If the land of a certain district consti-
tuting an economic unit (i. e. such that, with
existing means of transportation, no staples of
food could profitably be brought into it) were all
of a uniform quality, would none of it bear rent?
Adam Smith, I., 151-169, with Rogers's notes.
75. A court has been established in Ireland to
adjust rents between landlord and tenant. Is
this the same thing as fixing wages or prices by
some public authority?
Cairnes, Essays, 202-231.
76. It is argued that the system of "judicial
rents" will produce two sets of landlords instead
of one. What is the argument? Is it sound?
It is argued that fifteen years hence another
equally arbitrary interference with contract will
be necessary. What is the ground of that argu-
ment?
77. Can a class of peasant proprietors be
brought into existence by any legislative ma-
chinery?
78. What are the social and economic objec-
tions to the French system for the inheritance of
LAND AND RENT. 2/
land ? What are the objections to the English
custom of settlements?
Mill, V., 10, 4. Edinburgh Review, XL., 350.
Nation, XV., 218 ; XX., 312. Le Play, I., 271-293.
Probyn, 122-126 ; 184-212, cf. 108 ; 291-312.
Brodrick, 129-151. Walker, Land, 212 fg. Letourneau, 440.
Pollock, 181-5. Fawcett, Pauperism, chap. VI.
79. Discuss historically and logically this the-
sis : The tenure of land of the tiller of the soil is
always most fixed where personal independence
is lowest, and, the more liberty and individualism
are developed, the more precarious is the tenure
of land. At what point does fixity of tenure
turn from the bondage of the villain to the bless-
ing of the free man ?
Cunningham, 54, 97, in, 197-199. Seebohm, 176-178.
80. Do you know of any place where the
"margin of cultivation" or the " Ricardian acre"
can be seen? Where would you look for it?
Does it contravene the Ricardian law of rent to
show that the " margin of cultivation" for Eng-
land is in the United States?
81. "Few Irish farms have been able to fur-
nish the family of the actual cultivator with a
comfortable subsistence, and leave something
over to be contributed to the support of another
family in a certain ease. In England, owins: to a
28 ECONOMIC PROBLEMS.
greater abundance of capital, and the existence
of manufactures, the landlord has been compelled
to put up with a smaller share, because the far-
mer's standard of living- was higher, and his tra-
ditions of comfort and respectability so strong,
that no landlord could compel him to lower them
in order to pay a greater rent."
82. Definition of a fair rent: "A rent which
might be fairly paid, and yet permit a tenant not
deficient in those qualities of industry and provi-
dence which are expected in any walk of life to
live and thrive."
83. Is there any rent on a fishery, or a quarry?
Is there any rent on a water power? Is stump-
age a kind of rent ? Is there any rent on a mine ?
Note Rogers's comment (Adam Smith, I., 177),
and test his doctrine by the facts of the coal
trade in the United States.
Adam Smith, I., 171-185. Mill, III., 5, 3-
84. If one man owned New York harbor
could he obtain rent for it ? How great would
the rent be? What now becomes of what he
would get ?
LAND AND RKN I .
85. " How are pasture rents, shooting rents,
and ground rents of dwellings determined re-
spectively?" (M. 643.)
86. A picture by a great artist and an acre ol
land sold in 1825 for the same price. In 1875 the
same picture and the same acre changed hands
again for ten times as much each. Is there any
reason why the state should sequestrate all the
increased value (" unearned increment") in one
case and not in the other? (M. 725.)
87. It is said that a publisher pays Mr. Tenny-
son .4,000 per annum for the exclusive right to
publish everything written by Mr. T. Is there
here anything analogous to rent ? If any analogy,
how far imperfect?
t
88. A manager pays a prima donna so much
for each evening's performance. How far is
there here any analogy to rent ?
89. What are latifundiaf Where can we see
latifundia to-day, or the nearest resemblance to
them?
Letourneau. 424.
30 ECONOMIC PROBLEMS.
90. Discuss the proposition that the United
States shall sell no more land without reserving
the right to demand in future years the unearned
increment. Hitherto the popular land policy in
the United States has been that the land should
be given away freely, or at a nominal price, to
actual settlers. Has this been a mistake? What
is the fact about the tenure of land in the theory
of American law as compared with the same in
the theory of English law ?
Sumner, Jackson, 184-191.
91. Under what head would you classify the
income of a patentee or an author ; wages, profits,
or rent? (M. 23.)
92. Write an essay on Village Communities.
Maine. Village Communities; De Lavelaye, Primitive Property;
Seebohm, the English Village Community; Wallace, Russia.
V.
WAGES.
93. Mention as many different ways as you
know of, in which labor has received, or does
receive, remuneration for its share in production.
94. Obviously it is necessary, in order to un-
derstand the operation of the industrial system,
to trace the steps of one action and reaction with
care and detail. But production, exchange, dis-
tribution, and consumption, production, exchange,
etc., follow each other in a never ending series.
They in fact overlap at consumption and produc-
tion, as when the laborer, his energies revived by
sleep and breakfast, takes up his spade and again
tills the ground. It is in distribution, however,
that the replacement of the capital tajces place,
and we must begin to study a complete reaction
either with consumption or production. It really
is immaterial, save that our point of cessation
must correspond with our point of beginning. If
we follow through one reaction, we shall find
that it will cover the consumption, transmutation,
and replacement of the capital and a distribution
32 ECONOMIC PROBLEMS.
and adjustment of it to begin a new enterprise.
Criticise.
95. Wages are the remuneration of labor.
Wages are the sum paid per unit of time by
the employer to the employee, in return for which
the employee contracts to employ his productive
energy during a specified time in such manner as
the employer may direct.
Criticise these definitions.
Cf. Adam Smith, I., 67, 69.
96. Describe in detail the contract or com-
petitive wages system as a part of the modern
industrial system, and show what the relations of
employer and employee and their mutual rights
and duties are in it. Who constitute the wages
class ? Is there any distinctly differentiated wages
class in the United States? Under what circum-
stances is such a class distinctly differentiated ?
Walker, Pol. Econ., 379.
Stirling in Grant's Recess Studies, 309-333.
Jenkin, ibid., 171-187.
97. Cairnes argues that we cannot apply the
law of supply and demand to labor, because the
supply of labor is produced by biological forces
and not as commodities are produced. What is
the fallacy of this argument?
Cairnes, Principles, 152-3.
\\ACF.S. 33
98. If a change takes place in the supply of
la Dor, will a proportionate change take place in
wages? (Cf. question 33.)
Rogers, Prices, I., 265, 275.
99. An author who defines wages as the share
of labor in the product, writes: "The industrial
conditions were more favorable to the payment
of wages in the United States, while in England
the financial conditions were more favorable."
Does he violate his definition ? What is the force
of the antithesis in the italicized words?
100. Mill (II., 3, i and again p. 207, end of
chap. X.) speaks of the laborers as one of the
classes amongst whom the product is divided. At
the beginning of chap. XI. and afterwards, he
says that wages are paid out of capital. Is there
an inconsistency here? If so, what is the cause
of it, and how is it to be solved? Does he use
two different definitions of " wages " ?
Cf. also IV., chap. 3.
Princeton Review, November, 1882, p. 251.
101. Sidgwick (p. 318), commenting on the
confusion between product and capital noticed in
the last question, says : " This confusion seems to
be best avoided by considering the assistance to
production rendered by labor whatever form it
34 ECONOMIC PROBLEMS.
may take as constituting- the real capital of the
employer who purchases it ; and the commodities
that continually pass into the consumption of the
laborers as their share of the produce." Criticise
this proposition. Note that " assistance " is said
to be capital, and the assistance of the employee
to be the capital of the employer.
102. Sidgwick says again (same page) : " The
employer purchases the result of a week's labor,
which thereby becomes a part of his capital ; and
may be conceived, if we omit for simplicity's sake
the medium of exchange, to give the laborer in
return some of the finished product of his indus-
try/' Criticise this view.
103. "As the employer generally makes a
profit, the payment of wages is, so far as he is
concerned, but the return to the laborer of a
portion of the capital he has received from the
labor : so far as the employee is concerned, it is
but the receipt of a portion of the capital his labor
has previously produced." How does this doc-
trine differ from that in the last question ?
104. It is held that the laborer is the residual
claimant of the product of industry after rent,
profits, and wages of superintendence have been
paid out of it. Criticise this doctrine. How,
WAGES. 35
under this doctrine or that of the last three
questions, would } r ou account for the great ad-
vance in wages and other remuneration of labor
after the great Plague of 1348 ?
Walker, Pol. Econ., 265. Adam Smith, I., 109, Rogers's note.
Cunningham, 188-195. Rogers, Prices, I., 265.
Rogers, Work and Wages, chap. VIII.
105. Sidgwick says (p. 322) : " What remains
after subtracting the aggregate price paid for the
use of capital (including land) is obviously the
share of labor in the aggregate." Criticise that
doctrine. How would this and the doctrine of
the last question differ from the old doctrine that
wages and profits are the leavings of each other?
106. Competitive or contract wages and prof-
its are in no sense the leavings of each other.
They are not parts of the same whole. The
wages come out of capital. Hence one who has
no capital of his own, or borrowed, can not
become an employer, however great a chance of
profit he may see. The profits come out of the
product. The two (capital and product) stand,
one before and the other after the transmutation
of capital which occurs in every period of pro-
duction, and they are as distinct as the plow-
man's dinner in April and the farmer's sheaf in
August, or as the tailor's coat which he is wear-
ing and the employer's coat which the tailor is
36 ECONOMIC PROBLEMS.
making. The complementary parts of capital
are raw material and fixed capital. The wages
enter into the product, not as an explicit, but an
implicit, arithmetical factor. The product con-
sists of the replacement of the capital, profits, and
rent. The replacement of the capital consists oi
wages, raw material, and wear of fixed capital.
Hence we get two equations, letting x wages
an d/= profits: x-\-y-\-z capital ; (x+y-\
product. Capital and product bear no known
relation to each other. Hence no ratio of x to t
can possibly be derived, although it is plain that
an increase of x, other factors remaining constant,
would be- unfavorable to /. Expand and criticise.
Mill, I., 2, 2 ; 4, i, 2. Cairnes, Principles, 159-180.
Walker, Pol. Econ., 380.
107. Wages do not belong in distribution at
all. They belong under the head of consumption
productive consumption of capital carried for-
ward and constantly re-applied, from one period
of production to another, to sustain society and
increase the power of man over nature. Hence
the doctrine that wages are paid out of capital is
alone consistent with any sound knowledge of
the evolution of industry and the growth of
society. If we treat economics under two heads,
statics and dynamics, discarding the old divisions
WAGES. 37
as unphilosophical, wages will fall in the depart-
ment of dynamics. They are the tie which unites
two parties in the application of capital to pro-
duction, viz: one who wants to live by the
increase of his capital and cannot do so without
productive effort ; the other, who wants to live
by productive effort but cannot do so, in a highly
organized society, without capital. Hence the
two motives unite them in a contract relation
whose general aim is their common interest, but
within which their interests are antagonistic.
Hence nothing can benefit either which (like
limiting production) is hostile to their common
interest, and, under free competition, if either of
them wins a temporary advantage over the other,
he will have to pay it back again with interest,
but probably to the net advantage of both.
Hence their antagonism, if carried out by legiti-
mate means, is the law of life and growth and
not an evil at all. Cf. question 41. Criticise this
doctrine.
108. "The capital of the employer is, by no
means, the real source of the wages of even the
workmen employed by him. It is only the
immediate reservoir through which wages are
paid out, until the purchasers of the commodities
produced by that labor make good the advance
and thereby encourage the undertaker to pur-
38 ECONOMIC PROBLEMS.
chase additional labor." Show the fallacy. Is
" reservoir " a valid analogy? Suppose that the
product found no purchasers, or was burned up ?
Roscher, II., 56.
109. Macleod, whose fundamental proposition
is that " credit is capital," argues that wages
are paid in credit, i. e. that the employer pays
his laborers with bank notes. These notes " have
been part of the ' wages-fund ' and have been
* capital ' exactly as if they had been sovereigns."
" Hence we see that not only the accumulation
of past profits is brought into the wages-fund,
but also the anticipation of future profits. * *
Every future profit has a present value, and that
present value may be brought into the ' wages-
fund ' and made 'capital' of." Criticise the use
of credit, capital, and money in this argument.
Show that on this argument only, if it should be
admitted, would it be true that wages can come
out of product.
Macleod, IL, 120-128.
110. If an industry was generally depressed,
but one employer was, by exception, making
high profits, what rate of wages would he pay?
If an industry was highly prosperous, but one
employer was, by exception, making no profits,
what rate of wages would he pay ?
Princeton Review, November, 1882, p. 255.
WAGES. 39
111. Is it the same thing to say that wages
are determined by the supply and demand of
labor, and that wages are determined by the
ratio of capital available for wages to laborers
ready to work ?
Mill, II., ii, r. Princeton Review, November, 1882, p. 259.
112. What is the effect of an increased de-
mand for commodities on the wages fund?
Cairnes, Principles, 194-200.
113. What is the relation between prices of
products and wages of the laborers who make
those products ?
Mill, II., ii, 2. Cairnes, Principles, 200-210.
Rogers, Prices, IV., 491.
114:. What is the fallacy of connecting wages
by a sliding scale with the price of the product?
Marshall, 216.
115. If the intervals at which wages are paid
are longer than the period of production in any
industry, are the wages paid out of product, or
is the employer swindling the employee? If the
latter, show how.
116. Cairnes teaches that the capital is divided,
at the beginning of the period of production, into
40 ECONOMIC PROBLEMS.
fixed capital, raw material, and wages fund.
Later he argues that, if trades unions could suc-
ceed in putting up wages, they would reduce
profits so low as to check accumulation. Show
the inconsistency and show where the error lies.
Princeton Review, November, 1882, p. 252.
117. What is the effect to be expected on the
wages of laborers from insurance against acci-
dent, sickness, or death, (i) if the employers pay
for it in whole or in part ; (2) if " the state" pays
tor it in whole or in part?
Fawcett, Pol. Econ., 6th Ed., Chap. XI.
118. It is said that the gains of the venturer
(wages of superintendence) are analogous to rent.
What ground is there for this opinion ? Is the
venturer the landlord, the farmer, or the land ?
Walker, Pol. Econ., 247-255. Mill, III., 5, 4.
119. If the land of Great Britain should be
confiscated, would the wages of any employments
be affected ? If so, which ones, and why ?
120. If trades unions should establish a rule
that women should have the same wages as men
wherever they are employed in similar, work,
would that rule be for the benefit of women or of
men?
Mill, IL, 14, 5.
WAGES. 41
131. Suppose that working time should be re-
duced 20 per cent., what would be the effect on
real wages, on profits, and on prices? Compare
scarcity-high-wages with plenty-high-wages.
Cf. Rogers, Prices, IV., 491.
132. " The maintenance of a standard of com-
fort among laborers is like the maintenance of a
sea wall ; if a section give way all defense is lost.
Examine how far this is true, and investigate the
limits of defensible rules that laborers as a body
may impose on their associates." (M. 409.)
To what extent have trades union rules aimed
at or attained the end of maintaining the standard
of comfort?
133. Do you think that the protective taxes
lower the standard of living of American wage
receivers?
Strikes and trades union rules do not
have equal chances of success in all trades.
Their chances are better according as the trade
is a monopoly on account of physical circum-
stances, or special training, or skill, and accord-
ing as the public is annoyed by any interruption
of the industry. Prove this.
Thornton, 340-360. Marshall, 187-198. Price, Chap. VIII.
Sumner, What Classes Owe, Chap. VI.
42 ECONOMIC PROBLEMS.
125. Is there any ground for believing that
struggles between employers and employees can
be done away with by arbitration ? Can arbitra-
tion be employed in the making of a contract or
is it confined to the interpretation of a contract?
Marshall, 214-217.
126. Is it for the advantage of the wages class
to find some new and cheaper article of diet ?
Is it for the advantage of the wages class that
the wives and children of men of that class should
work for wages?
Is it a sign of advance in the community when
we see more boys employed as cash boys, mes-
sengers, etc. ?
Adam Smith, I., 76, 168-170. Mill, II., 14, 4, 5-
Walker, Pol. Econ., 321. McCulloch's Adam Smith, 467.
127. What is the effect on wages of having
part of the population soldiers, pensioners, pau-
pers and convicts, or an undue proportion of them
priests, monks and civil servants ? Are not such
persons withdrawn from competition in the labor
supply? How does your answer bear on the
question whether convicts ought to be employed
or kept idle?
The farmers of the United States are told that
it is for their interest to pay protective taxes tc
WAGES. 43
support manufactures, because otherwise the
manufacturing population would all compete in
agriculture. What is the fallacy of this argu-
ment ? Connect your answer to this question
with the answer to the last ?
Sumner, Argument, etc., 7.
128. Discuss briefly the employment of con-
victs, in its economic aspects ; discriminate the
cases where they are employed under superin-
tendents, or on a contract system ; at the market
price or below; all in one trade, or in a number
of trades.
Mill. II., 14, 4, 5-
129. Can the landowners of Great Britain
take all the advantage of the natural deposits of
coal and metal in that country, and not let
British wage receivers have a share in the bounty
of nature to their country ?
Cairnes, Principles, 54-57.
130. What is the effect on wages and profits of
exporting capital ?
Can any connection be traced between the
exportation of capital and the migration of labor ?
Suppose that English capital builds a railroad
44 ECONOMIC PROBLEMS.
in Iowa and an English laborer migrates to Iowa,
settles on the railroad line, and cultivates land.
What are the economic effects on all the parties
interested, and on the wealth of the two coun-
tries?
Adam Smith, II., 216, Rogers's note.
131. What is "store-pay?" Show by an analy-
sis of the transaction why it is very injurious
to wage receivers. Do the phenomena of store-
pay throw any light for the economist on con-
tract wages ?
132. An American landowner is often also a
mechanic ; say, for instance, a carpenter. He
builds a barn for some one and agrees to take his
pay in a lump sum when the barn is done.
What is the economic analysis of such a case?
Does it throw any light on the theory of wages?
133. How would the economist describe in the
technical language of his science that which the
popular dialect describes as " living from hand
to mouth?" Describe any persons in savage or
civilized life who so live? Can any inferences as
to a sound wages system be drawn from the
phenomena of living from hand to mouth ?
WACKS. 45
13-4. "A high rate of wages indicates, not a
high, but a low cost of production for all com-
modities measured in which the wages are high."
Prove this.
Cairnes, Principles, 382-386.
135. " Show how a rise or fall of the average
rate of wages within a country acts on its external
trade." (M. 435.)
Cairnes, Principles, 318-341.
136. " In the island of Laputa a law was passed
compelling each workman to work with his left
hand tied behind his back, and the law was justi-
fied on the ground that the demand for labor was
more than doubled by it. Examine this argu-
ment." (M. 443.) Would the human race be
better off on earth if each person had only one
arm? If a race should be evolved which had
four arms, would it be doomed to misery and
extinction ?
137. Some coal-workers want a diminution of
the out-put of coal as a means of keeping up their
wages. How far, if at all, would the means
accomplish the end ? (M. 444.) Would the hu-
man race be better off if the richness of the exist-
ing deposits of coal was reduced ten per cent. ?
46 ECONOMIC PROBLEMS.
138. "The day-laborer, feeling- himself more
of a man than formerly, must oftener wear a
white laundered shirt, but he cannot pay over 50
cents for one. The demand of the higher civili-
zation of the day-laborer must be met, and white
laundered shirts are supplied at retail for 50
cents or even for 37 cents. But the wages of the
women who make them have been reduced to 8
cents per shirt." Show the fallacy. Can a man
raise his standard of living at the expense of
others, just because he wants to? Does true rise
in the standard of living of one lower the wages
of others ?
139. In a shoe town a retail shoe-dealer under-
sells all his competitors 25 cents per pair. He
" obtains from the manufacturer his lowest price
for making 100 cases as per sample. He then
offers to pay so much a sum less than the manu-
facturer's estimate and pay cash. The manufac-
turer, rather than lose a good cash order, consents
to make the goods, but not being able to reduce
the cost of raw materials takes the discount out of
labor." Argued that the wages receivers work
against themselves and each other by buying as
cheaply as they can. Show the fallacy.
WAGES.
47 /
140. Ricardo said (p. 241): " In America and
many other countries, where the food of man is
easily provided, there is not nearly such great
temptation to employ machinery as in England,
where food is high, and costs much labor for its
production." Criticise this. What is the fact
about the " temptation to employ " labor-saving
machinery in the United States, and what is the
reason for it ?
141. Ricardo goes on : " The same cause that
raises [the wages of] labor, [i. e. greater cost at
which food is obtained for an increasing popula-
tion] does not raise the value of machines, and,
therefore, with every augmentation of capital, a
greater proportion of it is employed on machin-
ery." Is the doctrine here laid down true? Is
the reason given for it correct ?
Cairnes, Principles, 174-180.
142. Define and illustrate industrial copart-
nership. Whence comes the gain by industrial
copartnership ? Is the principle capable of indefi-
nite extension and application? If not, what are
its limits? What permanent good will the plan
accomplish, if it is generally employed? Why is
it not popular with trades unionists?
Thornton, 363-397. Fawcett, Pauperism, chap. V. Taylor.
48 ECONOMIC PROBLEMS.
What are the reasons for the gain in
cooperative stores? Is the principle of such
stores capable of indefinite expansion and appli-
cation ? If not, what is the limit? What would
result if cooperative stores should entirely dis-
place private establishments? Will such stores
produce a permanent improvement? If so, what
will it be?
Thornton, 397-418
1-44:. Cooperation in production and distribu-
tion aims to reduce or do away with wages of
superintendence. Would this be a great gain?
Is it possible ?
Holyoake, II., 86.
1-45. By aiding and encouraging the accumu-
lation of capital, cooperative stores operate a kind
of natural selection on the non-capitalist class,
selecting out those who have the will and energy
to better themselves, and helping them on, while
depressing by just so much more those who are
shiftless. If the selected women marry only the
selected men, the separation between these two
sections of what was once one class widens from
time to time. Expand and prove this or refute it.
Holyoake, II., 193-4.
WACKS. 49
146. Having in mind your answer to the last
question, discuss a proposition to provide decent
lodgings for the miserable, by the interference of
the municipality in a way involving expense to
tax payers.
147. Using your answers to the last two ques-
tions, show which kind of schemes for social aid
favor the survival of the fittest, and which kind
favor the survival of the unfittest. Can any
scheme have any other effect than one of these
two?
148. What is the effect of free common schools
on the comparative wages of skilled and unskilled
laborers ?
What is the effect of free schools, including
high schools, on the salary of female teachers?
What is the effect of endowed colleges and
seminaries on the salary of clergymen ?
What would be the effect of technical and
industrial schools, maintained by taxation, on the
wages of artisans ?
Adam Smith, I., 136-142 ; II., 363, and Rogers's note.
149. " On what does the rate of interest de-
pend? Is it affected by the amount of the cur-
rency? Does the rate of interest affect the price
of land or stocks?" (M. 561 ; 565.)
Mill, III., 23, 4. Jevons, Theory, 277-280.
VI.
CONSUMPTION.
150. The most important phenomenon in dis-
tribution, distinguishing distribution from con-
sumption, is the replacement of the capital.
Expand and explain.
151. Show the need of investigating con-
sumption as a department of political economy.
Show that the proposition : a demand for com-
modities is not a demand for labor, is a guiding
principle for a correct study of consumption.
152. Translate "A demand for commodities
is not a demand for labor" into other and less
technical terms in order to bring out its meaning.
153. At the end of a certain period of produc-
tion A, B, C, D, etc., were each a creditor in the
market for $i ,000. A bought and took as his share
that value in jewelry. B took means of subsist-
ence and lived in idleness while consuming them.
C took the same but distributed part amongst
5
CONSUMPTION. 51
servants who served him while he was idle. D
took the same and gave part to laborers who
dug an ornamental lake in his grounds. E took
the same and gave it to laborers who built a rail-
road which was not needed and could not pay
working expenses. F took his partly in the
same, partly in tools and seed, and employed
laborers to produce a crop of corn. G took his
in tools, etc., which were wanted by certain
foreigners to whom he lent them on interest.
o
Thus the second period of production passed.
What was the effect of the course pursued by
each of these men on the capital of the com-
munity in the third period of production, and on
the interest of wage receivers in the second
period and afterwards ?
154. Show that "a demand for commodities is
not, etc.," traverses the following fallacies:
(1) That the spendthrift is the benefactor of
the wage receiver.
(2) That wages paid measure cost of produc-
tion.
(3) That wages are or may be paid out of
product.
(4) That trades-union rules benefit wage-re-
ceivers by " making work."
(5) That we " want work " when we want
wages.
52 ECONOMIC PROBLEMS.
(6) That we need to take measures to " give a
circulation to money."
(7) That we want " an industry" when we want
goods.
Adam Smith, I., 343-353. Mill, L, 5, 9. Marshall, 16.
Cairnes, Principles, 48-54 ; 194-196 ; 249 ; 254.
155. How do the things- which are luxuries
vary from time to time ? What definiteness can
be given to the notion of a luxury ?
156. Is there any cause for anxiety on ac-
count of the large amount of " foreign luxuries"
which are imported into the United States?
157. Luxurious consumption is selfish and
unsocial ; productive consumption causes activity
in a great number and variety of social functions,
and multiplies the active relations of the con-
sumer with others. Criticise this assertion.
158. Discuss the economic effects on a com-
munity of an increased expenditure for theatrical
and similar entertainments.
159. What judgment is to be passed on " an
idle rich man" who has no vices, regarding him
and his behavior solely from the economic stand-
point ?
CONSUMPTION. 53
160. A writer on behalf of the Chinese in
California estimates their earnings at fifteen mil-
lion dollars, and then makes this argument to
show the good they do to that State: "Of this
sum, ten per cent, having been deducted for
savings, thirteen and one-half million dollars will
pass into general circulation, remaining to enrich
the State, or passing out of it to pay the debts of
the general population. It is a stream of wealth
which enriches the whole region." Did he prop-
erly use his facts to prove his case ?
161. " Luzerne County contains an area of
1,350 square miles. Until the development of
the coal trade, the agricultural production of the
county was in excess of the home consumption.
Now a different state of affairs exists. The rapid
increase of population from 1860 to 1870, amount-
ing to 90,000, changed the former order of things,
and notwithstanding she contains within her lim-
its some of the most fertile lands in the State, her
agricultural productions now fall far short of
the amount necessary for home consumption.
Nearly one-half of her citizens are non-producers,
relying upon the coal interest either directly or
indirectly for their employment or support."
162. " If one-third of the present agricultural
laborers in the (Western) States would become
54 ECONOMIC PROBLEMS.
mechanics, miners, etc., and thus consumers of
their former products, the other two-thirds
would find no trouble in sending- their dimin-
ished surplus to the East at reasonable rates, and
would retain at home the money now sent abroad
to purchase manufactured articles for their own
consumption."
163. State the economic effects to all parties
concerned, on the island and elsewhere, if a cer-
tain island, otherwise only sparsely populated,
should become a sanitary resort.
16-4. An Irish landlord had an income from
rent of x For four years he kept up a certain
establishment, hiring servants and buying sup-
plies wherever he lived, and exchanging his sur-
plus income entirely for products of France, i. e.
wine, brandy, silks, laces, ribbons, etc. The first
year he lived on his estate, the second in Dublin,
the third in London, and the fourth in Paris.
Was he an " absentee" in his second year? What
was the effect on the wealth of France, England,
or Ireland, or on the interests of any class in any
one of these countries, of his changes in his place
of living ?
He then changed his policy. He kept up the
same establishment and hired servants and
bought supplies wherever he lived, as before,
CONSUMPTION. 55
but he saved and made capital of his surplus.
The first year he lived in Paris and invested his
savings there. The next year he staid in Paris
but sent all his savings to Ireland for investment.
The third year he lived on his estate in Ireland
and invested all his savings there. The fourth
year he staid in Ireland, but sent all his savings
to Paris for investment. What was the effect of
his new policy in each of the four years on the
wealth of France and Ireland, and on the inter-
ests of any class in either?
165. A owns some land, some railroad
and a share in a factory, in Colorado. Does the
ownership of either of these pieces of property
create a duty for him to live in Colorado ; if so,
of which?
Is there any class in Colorado for whose in-
terest it is that he should live there ? If so,
what class?
166. Would you say that a man might live any-
where on earth that he chose, undisturbed by the
fear lest he was doing wrong, or neglecting his
duty to some of his fellow men, by living in one
place rather than another? If not, modify the
statement as you think necessary.
Would it make any difference with your an-
swer whether you regarded the feudal relations
56 ECONOMIC PROBLEMS.
of landlord and tenant as entirely superseded by
contract relations, or not?
167. " We are glad to see this determination
among millionaires not to be outdone by one
another [in building expensive steam yachts].
It is a rivalry in which all take the greatest
interest, and by which all are indirectly bene-
fited." " Extravagance, when practiced by mil-
lionaires is a blessed thing. It causes a freer
circulation of money, affords the laboring man
work, feeds women and children, and affects, in
fact, every industry, no matter how small."
168. "There was a notion that the money
appropriated by the river and harbor bill was
thrown away. Where? Probably ninety per
cent, went into muscle and labor."
169. Suppose that, by a change in climate, the
household consumption of coal in the United
States should be reduced one-half, what would
be the effect on the wealth of the country ?
(M. 36.)
170. Suppose that we should succeed in pro-
ducing a horse-power by electricity at one-half
the cost of producing the same by steam, what
CONSUMPTION. 57
would be the immediate and what the ultimate
effect on the wealth of the country? and on par-
ticular parts of its wealth?
171. Describe the state of society which would
be produced if, as fast as capital was accumulated,
it was put to productive employment, none of it
being consumed luxuriously, and if this was kept
up for, say, fifty years.
VII.
MONEY, CURRENCY AND BANKING.
17/3. Money is any commodity which is set
apart by common consent to serve as a medium
of exchange. Analyze and justify, or criticise
and correct this definition.
173. Is money a measure of value? If so,
why not include another specification in the defi-
nition? Define carefully " a measure of value."
It has been objected that value is a ratio (e.g., $)
and that we cannot measure a ratio. Is that
objection valid? Is money a "denominator of
value ?" Does " denominator of value " cover all
that is correct and essential in " measure of
value?"
McCulloch's Adam Smith, 480 fg., and Art. Money in tne
Encyc. Britan. 8th ed.
17-4. Currency is a collective term for all
forms of credit instruments by which the use of
the medium of exchange (money) is dispensed
with, the instruments of credit serving as records
and evidence of the rights of the parties until
MONEY, CURRENCY AND BANKING. 59
such time as value may be given and received for
value. Instruments of credit are not a cheap
kind of money. There is no such thing- as cheap
money. Instruments of credit are not in any
sense " substitutes for money," or " representa-
tives of money." Explain and criticise this de-
finition. Test it in the case of bank-notes, checks,
promissory notes, book debts.
175. In barter, one thing is given for another.
In the money system, one thing is given for
money and money is given for the other. In the
credit system, the instruments of credit are not
"media of exchange." One thing is given as
half of a barter, and a credit instrument (trans-
ferable or not) is created as a record and evi-
dence of the fact, and of a debt. When the other
thing is given the barter is concluded and the evi-
dence of debt is cancelled. The utility of credit
is that it makes money unnecessary. Criticise
and explain. Show why, as credit becomes more
general, the function of money as a measure of
value becomes more and more important.
176. Show that, historically, money was first
invented and used as a measure of value; that,
in time, when the "money system" had super-
seded barter, the function of money as a medium
60 ECONOMIC PROBLEMS.
ot exchange came to predominate ; that the func-
tion of measure of value is now again becoming
the more important as credit institutions are de-
veloped.
177. "Of the money daily used a very small
percentage is bank-notes. The great bulk is
checks, drafts and telegrams. The telegraph
transmits millions upon millions of bank credits
from Boston to New York, Chicago, London,
etc., etc., and the reverse, where the telegram is
the only money used." If, instead of telegraph-
ing, a man should telephone, would his words be
money? In the contribution box in church were
specie, greenbacks and bank-notes. A gentle-
man put in his card with $1.00 written in the cor-
ner. If the greenbacks and bank-notes were
money, was the card money ? A play-writer,
being under personal obligation to an actor sent
him a card on which was written, " Good for a
three-act comedy." Was this card money, if
greenbacks and bank-notes are money? Is any
definition of money possible if it goes beyond
the selected commodity ?
178. How would the question, whether Clear-
ing House Certificates are money or not, affect
or be affected by different definitions of money ?
MONEY, CURRENCY AND BANKING. 6l
179. A public-house keeper gave a glass of
beer to a shoemaker and put a chalk-mark on the
door against the shoemaker's name. After a cer-
tain time the shoemaker made and delivered to
the landlord a pair of shoes, thereby cancelling
the score. Was the chalk-mark money?, Was it
currency? Suppose that the shoemaker had sold
the shoes for a bank-note and paid his score with
the note, would the note be money? Would it
be currency ? Would the chalk-mark then be
money? Or currency? Suppose that the land-
lord gave a receipt for the payment, would that
be money? Would it be currency? What criti-
cism do these questions suggest on the definition
that money is any medium of exchange?
180. Show the fallacy of any definition of
money which puts checks in one category and
bank-notes in another. Is it a correct criterion
to say that bank-notes are taken in " final " pay-
ment, or " without recourse?"
Walker, Money, 399.
181. "Credit, no doubt, is a comparatively
fragile and perishable instrument for transferring
wealth." The "credit" of a banker who is
barely solvent, if solvent at all, is said to be part
of the capital of the bank, " provided we are
careful to point out that such capital is of fragile
62 ECONOMIC PROBLEMS.
nature, liable to sudden destruction in case of a
panic." Criticise the notions of credit, capital
and medium of exchange. Note especially " ira-
gile."
Sidgwick, 129, 239.
182. Define depreciation and appreciation of
the currency. What causes may produce either?
What are the effects of either?
More generally, what determines the value of
the currency ?
Hertzka, 20-76 ; 192-224. Chevalier on Gold, 124-137.
Cairnes, Essays, 53-77.
183. Define carefully the effect of habit in re-
gard to money.
184:. State the law of the distribution of the
precious metals.
Walker, Money, Chap. III.
185. A coin is a piece of metal convenient
for circulation which is assayed for quality,
weighed for quantity, and stamped by authority
as a guarantee of weight and fineness. Expand
and explain. Is a coin a highly developed tool?
Sketch the history of coins.
Art. Coinage, in Lalor's Cyclopedia.
MONEY, CURRENCY AND BANKING. 63
186. Some say that gold and silver are plainly
indicated by Providence as the materials for
money ; others say that we use gold for money
only because it is the most convenient thing we
know of for the purpose. Which do you think
right?
187. If we work a gold mine, gold comes out.
What goes in? On what does it depend whether
the community gains or loses by the exchange?
Adam Smith, I., 184; II., 141-4.
Cairnes, Essays, 43-52.
188. What facts go to determine the amount
of money which a country needs?
Mill, III., 9, 3. Roscher L, 366-374. Chevalier III,, 615-650.
Walker, Money, 44-76.
189. May an English cobbler get gold at less
cost than a California miner?
Mill, III., 19, i, 2. Cairnes, Essays, 103.
Roscher, I., 378-380.
190. In what respect is it an advantage to get
gold first after it leaves the mines? What was
the effect on Spain of being the first through
whose hands the gold of America passed in the
sixteenth century?
Adam Smith, I., 199; II., 86-88. Cairnes, Essays, 93-108.
Cairnes, Principles, 412-14.
64 ECONOMIC PROBLEMS.
191. One nation having conquered another in
war forced it to pay a great war ^indemnity.
Trace the effects on capital, money, prices,
wages, profits and credit in each country.
Price, 380-382.
192. France paid to Grermany over a thousand
million dollars. What were the actual transac-
tions by which this payment was made? Anal-
yze those transactions and show their significance
in an economic or financial point of view.
Say, 195. Giffen, Chap. I.
193. The mint price of gold, .900 fine, at the
San Francisco and Philadelphia mints is $18.604.
Why then is gold ever shipped from California to
New York ? (M. 990.)
194. Give the history of the trade dollar?
What was the object aimed at by the coin when
first coined ? Was it a desirable object, and was
coining the trade dollar a good means of accom-
plishing it? What is now the difficulty and dan-
ger connected with the trade dollar? What
legal ground of obligation exists, if any, why the
United States should redeem those coins at par
in gold?
MONEY, CURRKNCV AND BANKIXti. 65
195. We read in the money article, "The
price for silver bullion in London is 5o{| pence
per ounce. Here the bullion value of the 412^
grains silver dollar is $0.849." What is the mar-
gin for expenses and profits in exporting a silver
dollar to London, exchange being 4.84?
196. What is demonetization?
197. State the causes of the recent change in
the relative value of gold and silver.
See authorities under question 202. Crump, 254-267.
198. What have been the great changes in the
relative value of gold and silver during the Chris-
tian era?
Soetbeer, 114, fg. Chevalier, Economic Politique^ III., 354-465.
199. Has the ratio 1:154 for the value of gold
to that of silver any historical or scientific pres-
tige over any other ratio? Note that at the end
of the i6th century writers on money regarded
the relation 1:12 as " normal ' ; or as " given by God
and observed by nature."
Soetbeer, 127.
200. The Alternate (or Alternative) or Dou-
ble Standard consists in a free mint for either
gold or silver, the gold and silver dollar (or
66 ECONOMIC PROBLEMS.
other unit) having a ratio of weight (fineness
beirg the same) which is fixed by law,
Bimetalism is a project for forming a league of
civilized States to carry out an agreement to
coin gold and silver at a ratio of 15^ to I, on
the assumption that fluctuations in the value of
the metals can in that way be restrained within
such limits that there will be a concurrent circu-
lation of the two metals, and that the whole
amount of both metals may be' available for
money.
Expand and explain these definitions. Note
especially "free mint" and the function ascribed
to law, in the first; also, "project," "league,"
" i$y 2 : i," "assumption," " such limits," and the
notion about the desirableness of a large supply
of money, in the second.
201. Give the history of the French coinage
system from 1785 to 1873. Give the history of
tnc Latin Union. Did France resume specie
payments in 1878 on the double standard ?
Give the history of English coinage since
1700. What brought about the legislation of
1816?
Give the history of coinage in the United
States since 1790. What were the motives of the
Bland Silver Act? Wh.it have been its effects?
MONEY, CURRENCY AND BANKING. 67
Have they been such as the advocates of the act
expected? Whit further effects are to be ex-
pected ?
Articles on Coinage in Macleod's Dictionary of Political Econ-
omy and Lalor's Cyclopedia.
Princeton Review, Nov., 1879, p. 551. Le Touz6, 121-140.
202. The Alternate Standard and Bimetalism
or Concurrent Circulation stand on a totally
different plane. The former contains no scien-
tific absurdity. The question of adopting it is
purely one of expediency. A concurrent circu-
lation is a scientific absurdity and a practical
impossibility. It is scientifically as absurd as
perpetual motion, or perpetual inertia, because
it proposes to annul economic force. It is prac-
tically impossible because the league of States
would become weaker, not stronger, the more
members it embraced. Expand and prove.
Princeton Review, Nov., 1879. Hertzka, 270-288.
Walker, Pol. Econ., 406-417; Money, 243-271 ; Money and
Trade, 136-196. Horton, 29-36. Seyd., 584-680. Giffen, 197-
207 ; 286-310. Sidgwick, 453-4. Le Touz, 148-9.
203. "Imagine two reservoirs of water, each
subject to independent variations of supply and
demand. In the absence of any connecting pipe
the level of the water in each reservoir will be
subject to its own fluctuations only. But if we
open a connection, the water in both will assume
68 ECONOMIC PROBLEMS.
a certain mean level, and the effects of any exces-
sive supply or demand will be distributed over
the whole area of both reservoirs." Show the
fallacy of this analogy to prove that a compensa-
tory action can be established by the mint law
fixing a ratio of value of gold to silver, by which
compensatory action fluctuations in the value of
the metals will be neutralized.
Jevons, Money, 139-40.
204. Supposing that the bimetalic project could
be set going, and that the theory on which it is
based were sound, and that a new supply of gold
should be won from a new California, what would
be the effect on the interests of different parties?
Hertzka, 277,
205. Why did the Latin Union close its mints
against silver in 1874, and following years ? Was
the so-called "compensatory action" of the French
system accomplished at a loss to France or not?
Hertzka, 268.
206. If it should be granted that the alterna-
tive standard favors debtors, and that it is right
to favor debtors, would that exhaust the effect of
the alternation ? If not, what would be its wider
effects on classes and nations ?
Hertzka, 291-298.
MONEY, CURRENCY AND BANKING. 69
207. Under the alternate standard the standard
of value would have more numerous fluctuations,
but less wide fluctuations, than under a single
standard. Prove this. Which is the more im-
portant fact in regard to fluctuations, magnitude
or frequency ?
208. Is anyone the richer by obtaining money
unless by way of gift, theft, or gambling? (M.
899.)
209. In 1880 the nickel in a five-cent piece
was worth three cents. The silver in four quar-
ters or ten dimes was worth eighty cents "cents' 7
being hundredths of a gold dollar. A, B, and C
each paid a five cent fare. A, paid with a nickel
five-cent piece. B, gave a trade dollar which
was taken for ninety cents. He received three
quarters and a dime in return. C, gave a gold
dollar and received three quarters and two
dimes. What value in gold did each pay for his
ride?
210. Herbert Spencer argued that the func-
tion- of coining money would have been better
performed by private enterprise, Jevons ob-
7<3 ECONOMIC PROBLEMS.
jected that the gain in coining comes from mak-
ing bad money not good, so that competition
would run downwards not upwards. Hence, he
thought that coining was a peculiar industry
which the State ought to, or must, undertake.
A third person, commenting on this difference
of Spencer and Jevons, said that, if governments
had left coining to individual enterprise, the
Rothschilds would have given us a universal
money fifty years ago. Who was in the right,
and why ?
Jevons, Money, 64, 82. Spencer, Social Statics, 438. Cf. Sidg-
wick, 450-452.
211. Credit is not a thing but a personal rela-
tion. Hence it cannot be capital. It transfers
capital. Expand and illustrate this statement, or
refute it, if you think it incorrect. Show the ad-
vantages of credit and how it aids industry.
212. A bank is an institution which facilitates
the borrowing and lending of capital. Expand
and explain this definition. Show what false
notions of a bank it excludes. Does a bank deal
in credit or debt? Is it an essential function of a
" bank " to issue notes ?
Sumner, Tackson, 230, 233-4, 319, 362.
;Y, CURRENCY AND BANK IN' I.
213. BALANCE SHEET OF AN ENGLISH COUNTRY
BANK.
Liabilities. million.
Deposits, .... 1.74
Circulation, ... .05
Acceptances of London
bankers, . . .01
Capital, ... .18
Guarantee fund, . . .04
Profit to date, . . .01
2.05
Assets. million.
Cash, in London, and at call, .27
Government funds, . . .33
Indianandcolon.gov. secur., .44
Other securities, . . .06
Discounts, . . .14
Loans, 74
Bank premises, . . .03
2.05
What does this statement show in regard to
the kind and proportion of the operations of this
bank, its prosperity, and its ability to withstand
a financial storm ?
Gilbart, 98-108 ; 470-488.
21-4. BALANCE SHEET OF A SCOTCH BANK.
Liabilities. million.
Deposits, . . . 10.08
Circulation, . . .60
Fourteen day drafts, . .13
Acceptances, . . .17
Capital, .... i.oo
Rest or reserve, . . .75
Semi-ann. dividend, . .07
Balance, ... .02
12.85
Assets. million.
Cash on hand or in London, 2.08
Consols and colon, secur., 1.43
Bk. of Eng. and other stocks, .38
Discounts, . . . 6.85
Short loans, . . 1.58
Secur. against acceptances, .17
Bank premises, . . .20
Property paying rent, . .13
12.85
What can you learn from this statement about
the kind of business which the bank is carrying
72
ECONOMIC PROBLEMS.
on, its prosperity, and its power to stand against
a financial storm ?
Gilbart, 489-522. Macleod, Dictionary, Banking in Scotland.
215. BALANCE SHEET OF A LONDON JOINT STOCK
BANK.
Liabilities.
Deposits,
Circular notes etc.,
Acceptances, .
Endorsements, .
Capital, .
Rest, .
Profits, .
million.
. 23.09
.56
.52
.07
2.8o
1.64
.25
Assets. million.
Cash and in Bk. of Eng., . 2.86
Money at call and short
notice, . . . 3.71
Government securities, . 3.57
Indian gov. secur., . .75
Discounts and loans, . 17.15
Liability of customers for
acceptances, . . .52
Liability of customers for
endorsements, . . .07
Bank premises, . . .30
28.95
Criticise as in question 214.
28.95
Gilbart, 462-470.
Bagehot, 243-266.
Crump, 23-32.
216. WEEKLY STATEMENT OF THE BANK OF
ENGLAND.
ISSUE DEPARTMENT.
million. 1 million.
Notes issued, 38.01 Government debt, . . 11.01
Other securities, . 4.73
Gold coin and bullion, . 22.26
38.01
38.01
MONEY, CURRENCY AND BANKING.
73
BANKING DEPARTMENT.
million.
X
" million.
Proprietors' capital,
- 14-55
Government securities,
. 13.67
Rest, .
3.09
Other securities,
20.13
Public deposits, .
3.51
Notes,
Ii.qo
Other deposits, .
J* J *
25.02
Gold and silver coin, .
.68
Seven day and other
bills, .22
46.40
46.40
The Old Form.
Liabilities.
million.
Assets.
' million.
Circulation, .
. 26.33
Securities, . .
35-01
Public deposits, .
3.51
Coin and bullion,
22.95
Private deposits, .
. 25.02
'54.87 57.96
Balance 3.09 mill, as in the Rest above.
Rate of discount, 3 per cent.
Describe from this statement the organization
and operation of the bank. How much was the
" reserve ?" What was the per centage of reserve
to cash liabilities? Give the same points as in
the last three questions.
Gilbart, 21-71 ; 254-277. Crump, 268-307. Price, 410-436.
Bagehot, 160-243. Hankey, 73-124.
217. What are the peculiarities in the condi-
tion of the bank in each of the following state-
menjs ?
Notes issued,
ISSUE DEPARTMENT.
mill.
. 49.2
mill.
Gov. debt, . . . u.o
Other secur., . . 3.9
Gold coin and bullion, . 34.2
49-3
74
ECONOMIC PROBLEMS.
BANKING DEPARTMENT.
Capital, .
Rest, .
Public deposits,
Other deposits,
mill.
14.5
3-6
. 6.5
28.2
Seven day and other bills,
mill.
Government securities, . 15.2
Other securities, . . 16.0
Notes, .... 21.4
Coin, ... .8
534
Discount, 2 per cent.
What was the active circulation?
534
Notes,
ISSUE DEPARTMENT.
mill.
' 33-7
mill.
Gov. debt, . . . n.o
Other secur., . . 3.9
Gold coin and bullion, . 18.7
33-7
Capital
Rest,
Public deposits, . .
Other deposits, .
Seven day and other bills,
BANKING DEPARTMENT.
mill.
. 14-5
3-1
3-9
18.4
mill.
Gov. secur.,
11.7
Other secur.,
20.7
Coin, ....
.6
40.5
Discount, Q per cent.
Notes,
ISSUE DEPARTMENT.
mill.
, 21. 1
Gov. debt,
Other secur.,
Gold coin and bullion,
40-5
mill.
. n.o
3-0
6.6
MOXF.Y, CURRENCY AND BANKING.
75
BANKING DEPARTMENT.
mill.
mill.
Capital, .
14-5
Gov. secur.,
. 9.4
Rest, .
3-5
Other securities, .
26.1
Public deposits,
5-3
Notes,
Other deposits,
12.9
Coin, .
5
Seven day and other
bills, .8
1-1 n
7*7 r
Discount, 10 per cent.
218, STATEMENT OF A NATIONAL BANK.
Liabilities. $ thousand,
Capital, .... 464.
Surplus, . . . 203.
Undivided profits, . . 53.
Circulation, . 404.
Deposits, . . . 419.
Due banks, . . 27.
Resources. $ thousand.
Loans and discounts, . 708.
Over-drafts, . . .1
Bonds to secure circula-
tion (par value), . . 450.
Other stocks and bonds, 163.
Due from reserve agents, 105.
" " banks, . . 21.
Banking house, . 32.
Current expenses and taxes, 3.
Checks and cash items, . 4.
Exchanges for Clear. House, n.
Notes of other banks, . 15.
Gold, ... 30.
Silver, .... .9
Legal tenders, . . 9.
Redemption fund in U. S. T., 20.
$1,574- $1,574-
Criticise this statement in the same manner as
in question 214.
H. A. Richardson, National Banks.
76 ECONOMIC PROBLEMS.
219. "So many convertible bank-notes will
the public use as it has a positive need for in
paying" with bank-notes and no more." Expand
and explain. How does this assertion bear on
the question whether " paper is better than
specie?"
Price, 418.
220. Criticise the notion of what a banker
does which appears in the following : " We have
to consider that the banker to a great extent
produces the money he lends, viz: his own obli-
gations, which so long- as his business flourishes,
he is practically never compelled to redeem;
and that he may easily afford to sell the use of
this commodity at a .price materially less than
the rate of interest on capital generally." A
banker's rate for commercial bills may be less
than the rate of interest " since a comparatively
low rate of interest on the medium of exchange
inexpensively produced by the banker himself
would be sufficient to give him normal profit on
his banking- capital." For " banker " read coun-
terfeiter and so test the notion.
Sidgwick, 262. Price, 444-458.
221. A banker " may be only just able to pay
what he owes to others, and yet be, so long as
his credit lasts, a wealthy man. Suppose that
MONEY, CURRENCY AND BANKING. 7/
he owes ;i, 000,000 (without interest) [deposits,
etc.], and has debts of merchants, railway com-
panies and the government, which together
could be sold for ; 1,000,000. If there were a
run on the bank and he had to suspend payment,
his wealth would be found equivalent to zero;
but meanwhile he obtains the interest on i,-
000,000, which will leave him a handsome sur-
plus after paying the expenses of the bank. And
since there is no reason why he shall not con-
tinue to enjoy this surplus for an indefinite
period, his business might obviously be sold for
a considerable price, even though its assets did
not balance its liabilities, provided that the sale
were a secret one, so that its credit could be
maintained." Would such a man add to the
wealth of the country? We formerly had bank-
ers of this description in the United States but
we came to regard them as swindlers. Were we
wrong?
Sidgwick, 129.
222. Define the " currency principle" and the
" banking principle."
Walker, Money, 422-442; Pol. EC., 178-180.
223. How would you calculate the value to a
national bank of its circulation? Suppose that a
bank is formed on 4 per cent, bonds which cost
78 ECONOMIC PROBLEMS.
122 and have 20 years to run, the rate of dis-
count being- 5 per cent., what is the profit on the
circulation?
224:. " Explain the remark of an eminent
banker: 'If a customer asked me to lend him
10,000 sovereigns, I should answer : Withdraw.
If he asked me to lend him 10,000 pounds, I
should answer: Let us discuss the matter.''
(M. 1065.)
225. " What would be the effect if all the bank-
notes in the Banking Department of the Bank of
England were suddenly destroyed?" (M. 1152.)
226. In a period of depression there is just as
much currency in the country as ever, but large
sums lie in banks, and the rate of discount on
call loans is exceedingly low. Why? (M. 1220.)
227. What is the money market? What is
dealt in there ? What more correct designations
might be used?
228. What is the difference between stocks
and bonds? What are preferred stocks and
second mortgage bonds? What are coupon and
registered bonds?
MONEY, CURRENCY AND BANKING. 79
229. It is taught that the rate of interest
depends on the supply and demand of capital.
In times of crisis excessive rates of interest are
paid for the loan of bank notes, even of a sus-
pended bank. Why? and how is such a fact to
be reconciled with the doctrine first stated?
Adam Smith, I., 357. Walker, Money, 94-98.
230. Define carefully legal tender, showing
what it is and what it is not. Could Congress
make bits of colored paper circulate by declar-
ing them " legal tender?"
Princeton Review, November, 1879, p. 561.
231. Which is the better kind of paper cur-
rency, a government issue (greenbacks) or an
issue guaranteed by the government (national
bank notes) ? Give reasons in full.
232. If we had no public debt could we
have no national banks? or no national currency?
If greenbacks should be called in, paid, and
burned, and if the national bank note currency
should all be surrendered, and if no state banks
were allowed to issue notes, what would be the
effect on our interests or our convenience, and
what should we probably do?
SO ECONOMIC PROBLEMS.
233. Apply the theory of value to incon-
vertible paper currency issued by a government.
234. Whenever instruments of credit are
generally used as the solvents of contracts, and
as the things which are passed from hand to
hand instead of money, and in order to avoid the
use of money, such instruments of credit bear
upon their face the word " dollar," " pound,"
" franc," etc., by which they refer to coined
money which has acquired a traditional and
habitual, but variable purchasing power. What
is the difference between a bullion note, a con-
vertible bank note, and an inconvertible treasury
note, in their relation to the coin whose name
they bear?
235. The "fiat money" doctrine is that the
government stamp gives the value to a coin;
that the "dollar" is an ideal unit; and that the
government can just as well issue a note bearing
the inscription : " This is one dollar by Act of
Congress." What effect would it have on this
theory if at the same time a new name should be
invented for the " ideal unit of value," say, a
" Washington," and the note should read : " This
is one Washington by Act of Congress?" Could
MONEY, CURRENCY AM) BANKING. Si
such a note " measure value ?" If not, how or
why could a greenback do so before 1879?
Walker, Money, 280-290.
236. If the United States should issue " fiat
money" now, how would it be brought into cir-
culation ?
Walker, Money, 288-289.
237. Can you trace any connection or relation
between paper money inflation and the rise of
city real estate ?
Mann, Chap. X.
238. "A shrinking volume of money transfers
property unjustly, and causes a concentration
and diminution of wealth. It also impairs the
value of existing property by eliminating from it
that important element of value conferred upon
it by the skill, energy and care of the debtors
from which it is wrested. ' ;
239. The people ot Guernsey wanted a mar-
ket, but had not money with which to build it.
The governor issued paper money, receivable
for taxes and dues to the island government, in
sufficient amount to pay for the market. la ten
82 ECONOMIC PROBLEMS.
years the market earned its cost, which was paid
into the treasury in the paper money, which was
then burned, "and they got a market for nothing
only the credit of the island."
Cf. Jevons, Money, 204.
240. Describe the Clearing House and define
the economic advantages of it.
Jevons, Money, 263-289. Gilbart, Banking, 451-461.
241. Describe the Check Bank.
Jevons, Money, 290-298.
Macleod, Economical Philosophy, II., 510-514.
VIII.
INTERNATIONAL EXCHANGES.
242. " Is there any essential difference be-
tween trade between country and country, and
trade between county and county, or even be-
tween man and man ? What is the real nature
of trade in all cases?" (M. 1227.)
Cairnes, Principles, 305-6.
243. " We may often, by trading with for-
eigners, obtain their commodities at a smaller
expense of labor and capital than they cost to the
foreigners themselves." Explain this.
{ Mill, III., 17, 2, 3, 4, 5-
24:4. Define comparative cost of production
and show its importance to the doctrine of inter-
national trade.
Cairnes, Principles, 307-317.
245. Jevons argues that England never could
import coal and carry on her industries in com-
petition with those from whom she bought the
coal, the cost of transportation being a constant
8--
84 ECONOMIC PROBLEMS.
premium on the transfer of the industry. Do we
not see coal brought from Pennsylvania, Mary-
land and Virginia to New England to be used in
industry ? How does that fact bear on Jevons'
doctrine? What is the correct inference?
Jevons, Coal Question, Chap. XIII.
246. Jevons argues that coal is exported from
England as a return cargo and is essential to her
commerce on that account. Why so? Suppose
that she should use up her coal and try to im-
port Pennsylvania coal, what obstacle to that
would be interposed by the same doctrine when
viewed from this side?
247. Give a schedule showing the headings
of the accounts which enter into the international
exchange. Show from this how fallacious must
be any inference about the welfare of the country
from the preponderance of imports or exports of
merchandize and specie.
248. Suppose that the English wheat crop
fails and England imports wheat in great quanti-
ties from the United States. How would this
probably affect the price of bills of exchange
on England, and the price of English products in
America?
Mill, III., ch. 20.
INTERNATIONAL EXCHANGI S. 8$
249. " He hoped that [the three per cent,
loan] would be taken entirely by our own people,
so that the country would be saved from the annual
drain of a large sum which must otherwise go
abroad."
250. The English law ordains that 1869 sov-
ereigns shall be cut from 40 troy pounds of gold,
^j- fine. The French law ordains that 3100 francs
shall be cut from a kilogram of gold T 9 fine.
The law of the United States prescribes that
the dollar unit shall weigh 25.8 grains of gold,
-f$ fine. What is par of the metals between the
United States and each of the others, and be-
tween England and France ?
Seyd, 285-290, 301, 346. Le Touz6, 207-223.
251. What is the difference between long and
short exchange ?
Seyd, 427-433.
252. How is it that it is a mere matter of usage
whether we say that exchange has risen, or that
ic has fallen, when we mean that it has turned in
favor of importers?
253. Give a history of the suspension of specie
payments by France, 18711878. Show how the
86 ECONOMIC PROBLEMS.
currency was regulated while inconvertible, and
what currency doctrines were established by that
experience.
Bonnet, two Essays on the Payment of the Indemnity and the
Management of the Currency. Translated. Appleton : 1875.
Journal des Economists, isth December, 1874 (Wolowski).
254. Is it a benefit or an injury to the United
States that a part of the public debt is held in
Europe ?
255. We read in the money article, "Posted
rates of sterling 1 exchange were 4.82 and 4.84^.
Rates for actual business were as follows : Sixty
days, 4.81 and 4.81*^; demand 4.83^ @ 4.84;
cables, 4.83^ @ 4.85 ; commercial bills were
4.79^2 @ 4.80." Explain this statement in de-
tail. The minimum rate of discount at the Bank
of England was 3 per cent. Perform the arith-
metical calculation to show why the sixty day
bills and demand bills differed just as they did.
Goschen, Chap. IV.
256. American securities are sold in London
at an arbitrary rating, ;i=$5.oo. Why 'is this
arbitrary rating adopted? News was received
that 1000 shares of stock owned in New York
had been sold and paid for in London at 120 per
INTERNATIONAL EXCII ANCT.S. 8/
share. Cable transfers were 4.85. Brokerage was
}i of one per cent, on the par value. What was
the net cash value in New York of the return for
the stock?
257. In 1832 silver was the standard of the
United States, the silver dollar containing- 371.25
grains pure silver. The sovereign contained
113.002 grains pure gold. The ratio of value of
gold to silver was 15.625 : i. The traditional par
of exchange was $4.44=^1. What per cent, was
the true par of the metals of this assumed par?
258. Show, in a gold-producing country, what
the relations and interaction of new gold supply,
prices, relative amount of imports and exports,
and rate of exchange would be.
259. Let it be assumed that 5,000 Americans
go to Europe for the summer, and spend on an
average $1,000.00 each; that if they did not go
to Europe they would spend that amount of
money in American watering-places. State the
economic effects of this European travel on differ-
ent classes of the population in Europe and
America ?
88 ECONOMIC PROBLEMS.
260. " Whenever our gold is shipped to
Europe, it is noticed that we are spending more
than we are earning, and whenever a country
with our boundless and diversified resources
finds the balance of trade against it, every sensi-
ble man and woman should understand that it
means retrenchment or ruin."
"One of the virtues of extending the
hand of welcome to the Chinese is shown by the
fact that to-morrow one thousand of these leeches
leave San Francisco for Hong Kong bearing
$750,000 which they have made in this country.
More than 800 of them have, moreover, been
provided with return certificates, which enables
them to return and take away more of our
money."
262. " In earlier days the leather made [in
California] was shipped abroad or to the East,
and some portion of it was returned in manufac-
tured forms. The consumer had thus to pay in
the price of his purchases the cost of two or
more expensive shipments, and of several com-
missions. It cannot be for his interest to do this,
nor for the interest of the cattle raiser, who
produces hides, for that of the tanner who pre-
pares them, nor in the broadest sense for the
interest of the country."
IX.
ECONOMIC POLICY:
<
Socialism , Adjustment of Rights, etc.
263. What are the characteristics of an in-
dustrial civilization ? How does the tone and
temper of a people trained under an industrial
civilization differ from that of a people trained in
a military or police state? Show that socialism
is at war with industrial civilization.
Spencer, Sociology, I., 584-590 and fg. ; II., 603-642.
264. In a modern free state, should the ques-
tion be: Why let alone? or: Why not let alone?
Sumner, What Classes Owe, Chap. VIII.
265. Prove that state regulation of education,
factories, food, lodging, etc., is all illusory so
long as the state does not regulate family life, or
that, if the state is to regulate at all effectively,
it must regulate the family.
Lctourneau, 401-2. Rae, 190.
89
90 ECONOMIC PROBLEMS.
266. Try to make a formula to define the limits
of state interference.
Adam Smith, II., 306. Woolsey, I., 243-269.
Humboldt. Mill on Liberty. Baden-Powell, Chap. I
Spencer, Social Statics, Essays.
Rogers, Art. Free Trade, gth ed. Encyc. Britannica.
Sumner, What Classes Owe, 112-153.
267. If it could be proved to a laborer that a
man of his class in the I3th century had better
and surer food and clothes than he, he would not
for a moment think of returning to the complete
status of the I3th century, just on account of
what distinguishes the iQth century from the
1 3th, viz: personal liberty, independence, and
civil rights; but these are the blessings of which
free competition is the price. Criticise this
assertion.
Cunningham, 387-410.
268. A certain job being offered for competi-
tive bids, one man bid much below any others,
being very anxious to get it, and being willing to
employ certain means which other contractors
disliked, but by which he could make important
savings. When the bids were opened his was
rejected because, as he was told, he would ruin
himself. His plea that he knew his own business
was disregarded. What light did this case throw
on competition and laissez-faire?
SOCIALISM 9!
269. The individual's worst troubles come
from the cases where the state cannot let him
alone, because it adopts lines of policy to which
he must conform. E. g. : If the state issues
paper money no man can separate himself from
those who like paper money, and go his own way
on his own judgment. The incidental incon-
veniences of laissez-faire are not to be compared
with the positive evils endured by a wise min-
ority forced to yield to a foolish majority.
Expand, prove, and collect other instances.
Show that the philosophical basis of laissez-faire
is in the fact that we cannot tell, before the
event, who is wise and who foolish.
270. Roscher says : " There is what we might
call a public conscience concerning merit and
reward, by which a definite relation of the three
branches of income to one another is declared
equitable. Every * fair-minded man' feels satis-
fied when this relation is realized, and this feel-
ing of satisfaction is one of the principal condi-
tions precedent to the prosperity of production,
inasmuch as on it depends the participation of
all owners of funds and forces." Does this pas-
sage describe facts ?
Roscher, II., 166. Walker, Polit. Econ., 281-286.
92 ECONOMIC PROBLEMS.
271. If a man takes an axe and goes into the
woods to cut wood, what is a "just" return for
his day's labor? Suppose that one man's wood
lot is half a mile from home and another's five
miles from home, is there any case here under
the head of ''justice?" Can we say that a man
" must" get profits on the capital in the axe and
wages for his time? What would be the differ-
ence in regard to "just" and "must" if another
man owned the wood-lot, provided the axe, and
contracted with the first man to go and chop the
wood ?
272. Each productive laborer puts a share
into the combined social productive effort, and
each gets some share in the total social satisfac-
tion. The proportion of the effort to the satis-
faction is determined by supply and demand,
under the existing conditions of the industrial
system. There can be no possible conception of
a "just" return, or of "justice," hi this connec-
tion, except the true ratio of effort to satisfaction
produced by the free play of supply and demand
under existing circumstances. Criticise this
statement. Does "justice" have anything to
do with the question whether A and B get as
favorable a ratio of satisfaction to effort, one as
the other? Suppose that A were an artisan and
B a flunkey.
SOCIALISM. 93
273. Distinguish between the right to get,
possess, and enjoy property, and the right to be
a property-holder. Which is true and which
false? What is the fallacy of any notion of natu-
ral rights? Is there any physical or metaphysi-
cal good which is gratuitously bestowed on the
human race? Show that "equality" never can
belong to being or having, but only to the condi-
tions, chances, and burdens which are created by
the state.
De Lavelaye, Preface, and 348-353- Rae, 186.
Sumner, What Classes Owe, 13-15 ; 134-136; 163-169.
274:. What classes emigrate from Europe to
the United States? What classes emigrate from
the United States to Europe? Why are the facts
as they are ?
275. Do you think that there is a tendency ot
enlightened opinion toward the establishment of
a right in every man born on earth to go to, and
live on, any part of the earth where he thinks
that the environment will be most favorable for
such a man as he is? If not, state what modifica.
tion you would want to make in that doctrine of
right before you would assent to it.
94 ECONOMIC PROBLEMS.
276. If a man owns some land, a horse, and a
plow, is there any difference in the meaning of
"property " as applied to each of those things?
If so, what is it?
Rae, 446.
277. What are vested rights? What signifi-
cance have they for the happiness of man and as
regards the end for which the state exists ? Why
do some of the greatest difficulties and dangers
of a progressive and liberal state arise from them?
Mill, II., 2, 2.
278. To pull down those who are superior in
wealth, culture, talent, virtue, or education is to
act like an army invading a hostile country,
which should shoot its own advance guard.
Expand and prove this, or correct and refute it.
279. Can any person be held under obliga-
tion to contribute to the struggle for existence of
any other person, unless the former be shown to
be in some way responsible for the latter's exist-
ence? If so, who? and on what grounds?
Mongredien, Wealth, 233.
Sumner, What Classes Owe.
280. Is there any human being who, in any
conceivable circumstances, can rightfully say : " I
must live " ?
SOCIALISM. 95
281. It is affirmed that the most efficacious
cause of the accumulation of great properties is
allowing women to inherit on an equal footing
with men. Is that true? If so, what bearing
does it have on current discussions about ine-
quality of possessions? Would it be, in other
respects, desirable to reverse the tendency of
modern times in regard to the property rights of
women ?
Letourneau, 184, 433-4. De Lavelaye, 217-220.
282. A Connecticut farmer declared that he
could not " make any money " because he could
not hire any laborers. He said that they all
demanded too high wages. A New York mer-
chant declared that he could not " make any
money " because his landlord demanded an ex-
travagant rent; the landlord declaring that an-
other tenant was ready to pay the rent demanded.
A person who had no capital, but who wanted
to carry on business, complained that he could
" make no money " because he had to pay such
high rates of interest for capital which he bor-
rowed. State the true significance of the facts
alleged in each case. What is the correct criti-
cism on these complaints when analyzed and
generalized ? What should we say of a proposed
law to provide one with laborers at wages to suit
him, another with a store at rent to suit him, and
the third with capital at a rate to suit him ?
96 ECONOMIC PROBLEMS.
283. " State what you believe to be the chief
economic arguments in favor of the succession of
relatives to the property left by deceased persons,
instead of its lapse to the state." (M. 238.)
Mill, II., 2, 3. Letourneau, 440.
284. Distinguish between different kinds of fac-
tory acts and state their justification. (M. 1386.)
285. Is there the same justification for indus-
trial schools (teaching trades) as for common
schools (giving general culture)? (M. 1390.)
286. Is compulsory school attendance justi-
fiable when tax-payers are forced to orovide
schools?-
287. " These wretched people (in the slums of
London) must live somewhere, and it must be
near the center, where their work lies. It is
notorious that the Artisans' Dwelling Act has, in
some respects, made matters worse for them.
Large spaces have been cleared of fever-breeding
rookeries to make way for the building of decent
habitations ; but the rents of these are far beyond
the means of the abject poor. They are driven
to huddle more closely together in the few loath-
SOCIALISM. 97
some places still left to them, and so Dives makes
a richer harvest out of their misery, buying up
property condemned as unfit for habitation, and
turning 1 it into a gold mine, because the poor-
must have shelter somewhere, even though it be
the shelter of a living tomb. The State must
make short work of this iniquitous traffic and
secure to the poor the rights of citizenship, the
right to live in something better than fever dens,
the right to live as something better than the un-
cleanest of brute beasts. This must be done
before the Christian missionary can have much
chance with them."
288. Would it be expedient for a State to ex-
pend capital in creating a colony and persuading
its emigrating citizens to go to that colony,
rather than to let them go whithersoever their
interest might lead them? Would it be for the
interest of either Germany or the United States
that German immigrants should take possession
of one State of this Union and make it a " Ger-
man State ?"
Roscher, II., 371. Adam Smith, II., 134-225.
289. An argument for government favor to
capitalists by not placing the interest on govern-
ment bonds at the lowest market rate:
98 ECONOMIC PROBLEMS.
" If we were dealing- with the money-lenders of
Europe the question would be entirely different ;
but we are dealing with our own people ; we are
dealing with women, with children, with those
whose property is in the hands of guardians and
trustees ; with the farmer who has laid aside tem-
porarily a little money ; with the merchant who
has a little balance which he desires to invest in
a security which shall be not only absolutely safe
but which he may convert at any moment with-
out loss. Do we want to stand if I may use the
word jewing with this class of people to see
whether this rate of interest shall be 3^ or 3^
or 3 per cent.? We must remember that what
the government will save by cheapening the rate
of interest this class of people of whom I have
spoken will to a great extent lose."
290. An American hotel-keeper who failed
said that "one of the drawbacks with which
hotel-keepers have to contend is the constant in-
crease of rent demanded by our landlords just as
soon as they discover we are making a dollar."
If the principle of the Irish land act is sound
should not the legislature appoint a commission
to examine into the truth of the alleged fact, and,
if it be found true, should not a court be ap-
pointed to assess the " fair rent" of a hotel?
SOCIALISM. 99
291. On what grounds may railroad land grants
be justified?
292. It is objected to patents that they establish
property in an idea or device, but that no prop-
erty in an idea or device should be recognized
because two men, or any number of men, can use
the same idea or device without interfering with
each other, or using it up, but that property in
land or chattels is recognized because two men
cannot use or enjoy them at the same time. It is
also objected that patents are given only for pri-
ority, not for the invention, and that, within the
period of the patent, many persons might inde-
pendently work out the invention, but are de-
barred from using it, even for themselves, by the
patent law. Criticise these arguments.
293. "A copyright is a patent under another
name and applied to another class of objects,
writings instead of inventions." Is that state-
ment correct? Distinguish thoroughly between
copyrights on the one side and patents and tariff
monopolies on the other.
Ford, II., 58.
294:. Why is transportation a matter of so
much greater importance in the United States
than in England, France or Germany, and why
100 ECONOMIC PROBLEMS.
are transportation questions so much more diffi-
cult here?
295. It is said that a railroad pool does away
with competition. Why is that not quite cor-
rect?
296. What are income bonds ? What are col-
lateral trust bonds ?
297. The trunk lines, by agreement, charge one
cent per bushel for elevator work at New York,
Baltimore and Philadelphia. The New York
railroad commissioners urged that this charge
should be abolished at New York. The repre-
sentatives of the railroads replied that to do so
would put the port of New York at a disadvan-
tage. At other ports steamships lie alongside of
the pier on which the elevator is, and there is an
elevator charge of one cent per bushel. In New
York the ships will not come to the elevator but
the grain must be lightered in floating elevators.
The roads pay lighterage, three-fourths of a cent
per bushel, and charge elevator charge of one
cent. If the elevator charge were abolished at
one place, it would be at all, and that would
leave New York at a disadvantage.
Criticise this allegation and inference.
Report, Hepburn Committee, 22-25, 33-4.
SOCIALISM. 101
298. What is watering- stocks? Specify as
many varieties of it as you can think of. Could
a house, a newspaper, or a race-horse, be
" watered " in the same way ? Why do we
never hear of it? Why should anyone desire to
water stocks ?
299. A subscribed three shares in a company
at par. He received twelve per cent, dividend
and the stock was quoted at 200. The company
increased its capital in order to extend its busi-
ness. It did so by allowing each owner of three
shares to subscribe for and get one new share for
$100. A sold his "right" for $75. After the
increase the stock was quoted at 175. Analyze
this operation and show its significance for the
rights and interests of the public or of any par-
ties concerned.
300. How would you capitalize a newspaper, a
lease, a patent right? A company is formed to
build a railroad. They subscribe for first mort-
gage six per cent, bonds in sufficient amount to
build it. When it is done they make a stock
capital for it. Why do they adopt this method?
Criticise it. What should be or may be the
amount of the stock capital ? This stock capital
is said to be " ail water/' What is meant by
IO2 ECONOMIC PROBLEMS.
that and is it true? What, if any, property or
valuable thing is behind that stock? What is
meant by " capitalizing the road at all which the
traffic will bear?" It is said' to be a wrong to
the public to do that,, Why? What do you
think about it?
301. It is argued against watering stocks that
if a railroad doubles its stock it has to raise its
rates for freight and passengers so as to force the
public to pay profits on the increased stock.
Criticise that argument, taking note of the two
cases, one where the road is a monopoly and the
other where it is in full competition with others.
302. A few able and unscrupulous men com-
bined and bought, at a low rate, the stock of a
railroad which was well situated but badly man-
aged. They subscribed new capital, put it in
good order, paid a dividend, and issued a glow-
ing report. The stock rose to a high figure.
They then doubled the stock and also issued
bonds on the road for a large amount. They
paid large dividends on the watered stock and
the half shares were soon as high as the whole
ones were before. They then bought up par-
allel and branch roads at low rates and sold them
to the former railroad for its bonds. These and
SOCIALISM. 103
their stock they then sold. Next they ceased to
pay dividends and issued a gloomy report.
Thereupon the stock fell and they bought it
again. What had " watering stocks " to do with
these transactions? What had issuing annual
reports to do with them ?
303. A patentee found after a few years that
his patent brought him in $5,000 a year. Nine
capitalists subscribed $5,000 each to buy of him
nine-tenths of his right. The ten then subscribed
$5,000 each and formed a joint stock company to
develop the patent. It had still ten years to run
and they expected that it would earn at least an
average of $25,000 per year for those ten years.
They put the capital of the company at x dollars,
of which each of the ten took one-tenth at the
start. What difference did it make to any body
what the value of x was? If you were one of the
ten, at what value would you want x put, and
for what reasons ?
304. Write a short essay on the postal tele-
graph. Consider the possibility that telegrams
might be sent at a uniform rate as letters now
are.
Jevons, Social Reform.
104 ECONOMIC PROBLEMS.
305. Write a short essay on the purchase of all
railroads by the federal government.
306. Write a short essay on the nationalization
of the land.
Fawcett, Pol. Econ., 6th ed., Chap. XI. DeLavelaye, 320-1.
307. Write an essay on " National Education,
i. e., on the proposition, in various forms, to have
the federal government meddle with education.
X.
ECONOMIC POLICY:
Public Finance.
308. In what circumstances is it possible to
Deduce the interest on the public debt?
Leroy-Beaulieu, II., 365-376.
309. Is it possible to pay off a public debt too
rapidly ? What is the effect of paying it very
rapidly?
Sumner, Jackson, 266-72.
310. What measures the burden to a people of
their debt?
Is it right to put the extraordinary expenses of
this generation as. a burden on the next? On
what grounds might an argument be made for so
doing?
If a nation is young and growing, what will be
the fact with regard to the burden of the debt
from decade to decade. How does this fact bear
upon the policy of heavy taxation now to pay the
debt of the U. S. speedily ?
Leroy-Beaulieu, II., 308-311 ; 360-363.
105
106 ECONOMIC PROBLEMS,
311. What was the experience of England with
a " sinking fund " between 1790 and 1828 ?
Hamilton, 80-171. Leroy-Beaulieu, II., 306-322.
Accounts and Papers, 710.
312. Has the United States ever had similar
cperience ?
Seybert, 759-774-
313. What is the arrangement about the sink-*
ing fund of the federal treasury now? Is the
sinking fund of any use or necessity aside from
the contract with the bond-holders? Has it any
Value in fact for them ?
W. A. Richardson, 82-85.
314:. Show that a sinking fund is not a force
in itself, and never can do anything towards the
payment of a debt beyond just the amount of
saving which is put into it.
315. What was the fallacy of deductions from
compound interest which were made the basis of
sinking fund doctrines a century ago?
316. How is the reduction of the English debt
now accomplished instead of using a sinking fund ?
Accounts, etc., 720.
PUBLIC FINANCE. IO/
317. What arc exchequer bills? What is the
theory of their use?
Bagehot, chap. IV.
318. It is argued by very sound and con-
servative economists on the continent of Europe
that it is expedient to connect a drawing of
prizes with drawings of the public debt for pay-
ment, because fortune and misfortune enter into
human life, and constantly affect the managers of
capital, so that to offer the small fund holder a
chance of a bit of good fortune is only to give
him a chance of the same kind. Criticise this
argument.
Leroy-Beaulieu, II., 246-250.
XL
ECONOMIC POLICY:
Taxation.
319. Define taxation. Show its relations to
economic science and statecraft. Show what
importance it has for the welfare of the people.
Distinguish between arbitrary exactions by irre-
sponsible officials where public peace and secu-
rity are not assured; taxes laid for other pur-
poses than revenue and having- no relation to
good government ; and strictly economical taxa-
tion for which the citizen gets peace, order, and
security.
320. The discussion of the canon that taxa-
tion should be equal has been much confused by
the fact that the disputants sometimes mean
equal with respect to units of commodity or
property or income, and sometimes equal with
respect to the personal circumstances of the
different individuals taxed. Expand and explain
this statement.
108
TAXATION. 109
321. Taxes diffuse themselves on the line of
least resistance. Expand and prove.
322. The parties to an exchange share in all
the burdens and hindrances of the same in the
direct ratio of their eagerness for the exchange,
and they share in the profits and advantages of
the same in the inverse ratio of their eagerness
for the exchange. This applies to taxes, freights,
etc. Prove this proposition.
Mill, III., 8, 2.
323. From what sources are the revenues of
Great Britain obtained now ? From what sources
are the revenues of the United States obtained ?
Make a comparison of the two systems of reve-
nue.
Wilson, 109-130. Ford, II., 137-149.
324. Give the history of financial reform in
England during the second quarter of this cen-
tury.
Wilson, 66-85. Mongredien, Free Trade.
Martineau, vols. 2, 3 and 4.
Levi, British Commerce.
325. What are the main points in the Peel-
Gladstone system of national finance?
Giffen, Chap. IX.
Molesworth, England, II., 50-228 ; II., 380, III., 225.
110 ECONOMIC PROBLEMS.
326. "Under what circumstances are taxes on
wages transferred to the employer of labor?"
(M.I555-)
Adam Smith, II., 460-463 ; 466-472, Mill, V., 3, 4.
327. Criticise the Prussian class-tax.
Leroy-Beaulieu, I., 276-280 ; II., 459-461.
328. Discuss the arguments for and against a
legacy and succession tax.
Adam Smith, II., 453-4. Mill, V., 2, 7. Jevons, Coal, 365.
Leroy-Beaulieu, I., 489-500. Letourneau, 440.
Sumner, What Classes Owe, 49-50.
329. Discuss taxes on railroads.
Sidgwick, 574. Leroy-Beaulieu, I., 542-545.
330. Discuss an export duty on raw cotton;
on wheat.
Mill, V., 4, 6. , Sidgwick, 576.
331. How are we interested in the repeal erf
the Brazilian export duty on coffee ?
332. Coal is essential to England's industry.
It has been feared that her supply would be ex-
hausted, and it has been proposed to put an
export duty on it. Would that be wise ?
Jevons, Coal Question, 260-261 ; 276-278 ; 354-360.
Fawcett, Free Trade, 163-4.
TAXATION. 1 1 1
333. Write an essay on income tax, including
progressive income tax.
Leroy-Beaulieu, I., 126-164 ; 422-470.
334. Write out the notes of a speech which you
would make, if you were a member of Congress
this winter, and it was proposed to abolish the
duty on sugar.
335. Draw up a budget for the United States
for the fiscal year 1883-4 on the basis of the
expenditures of 1882-3, showing what taxes or
other means of revenue you would employ to
provide the required amount.
XII.
ECONOMIC POLICY:
Protectionism.
336. What is the English system of free
trade? England levies taxes on some imported
commodities. How is this fact to be understood
when she claims to have adopted free trade?
Sumner, Protection, 10.
337. Discuss export duties on raw materials
and fuel, prohibitions on the export of machinery,
prohibitions on the emigration of laborers, boun-
ties on the export of finished products, and taxes
on the imports of commodities, in their relations
to each other and as parts of a general system.
Adam Smith, II., 79-99 ; 120-122 ; 226-246.
Sumner, Protection, 31.
338. Are there are any economic advantages
in being the first to take a wise or right course?
Does a merchant or manufacturer argue well
who says : " I must cheat or I shall be beaten by
my rivals who cheat?" Can you illustrate your
answer by industrial copartnerships or free trade ?
PKOTI-XTJOMSM. 113
If all men were honest, would honesty have com-
mercial value ?
Mongredien, Wealth, 209-212.
339. Mill says (p. 515): "Those are therefore
in the right who maintain that taxes on imports
are partly paid by foreigners; but they are mis-
taken when they say it is by the foreign pro-
ducer." What foreigner is it who pays? and
what is Mill's argument?
340. It is said that exigencies arise in the
history of a country when it just needs a little
help to lift it over a difficulty. Criticise that
notion. It is said that a protective tariff is just
what is needed to give the assistance. Assume
the general notion to be true and criticise the
special device here proposed.
Princeton Review, March, 1881, p. 247.
341. State any proposition which you think
you can maintain about the relation between high
or low wages and international competition.
Sumner, Protection, 22, 42 ; Argument, etc., 10.
342. In the United States employers say that
they need protection because they have to pay
high wages. Employees say that they want pro-
114 ECONOMIC PROBLEMS.
tection so as to make their wages high. In Ger-
many employees say that they want protection
because their wages are low. In each case
" high " or " low " is taken with reference to
English wages. Criticise these arguments sepa*
rately and in relation to each other
Sumner, Argument, etc., 8, 9.
343. If a man goes into a store and finds a
piece of cloth such as he wants, does it make any
difference to him, in any point of view, whether
the cloth was made across the street or across
the ocean? What about the cloth alone makes a
difference to him ?
344. Show the inconsistency between laying
heavy duties on commerce and dredging out
harbors; between taxing commerce and subsi-
dizing ships ; between protecting manufacturing
and giving land grants to railroads which make
new land accessible.
Sumner, Protection, 14; Jackson, 183-4.
345. Show that, if the protectionists are right
in laying taxes " to develop our resources," re-
sources are calamities. Why was the discovery
of a nickel deposit in the United States a misfor-
tune, and why may we regret that a tin mine has
just been discovered ?
PROTECTIONISM, 115
346. Show the fallacy of the protectionist
argument that capital, which would otherwise
be unemployed, is, by protection, drawn into
use; that a higher organization of industry is
brought about which increases production.
Sumner, Argument, etc., 5.
347. One country has a good and cheap gov-
ernment and therefore low taxes. Another coun-
try has a bad and very expensive government,
and therefore high taxes. In the first, industry is
very free and secure. In the second it is tram-
melled and uncertain. The former therefore
beats the latter even in its own markets. The
producers of the latter therefore demand a pro-
tective tax to " offset the heavier domestic taxes
which they have to pay," and "to put them on
an equality with their rivals." After such tax is
laid, how many independent evils is the second
country suffering from? .
348. Show the fallacy: "The money to re-
place what has been burned [at Chicago] will not
be sent abroad to enrich foreign manufacturers,
but, thanks to the wise policy of protection which
has built up American industry, it will stimulate
our own manufacturers, set our mills running
Il6 ECONOMIC PROBLEMS.
faster, and give employment to thousands of idle
workmen." Was the fire a calamity?
Compare this case: When Pittsburg was burn-
ing in 1877, during a riot, the bystanders refused
to put out the fire, saying: " Let her burn, boys!
It will make work."
Cairnes, Principles, 253. Sumner, Argument, etc., 8.
349. A process having been discovered for
utilizing as fuel great mountains of refuse which
has hitherto accumulated at the mouth of coal
mines, the production of steel rails is greatly
cheapened for the mills which are near the coal
mines. The competition of these mills closes up
others less favorably situated. T s this course ol
things a calamity to anybody? If so, to whom?
Is it not a misfortune and injustice to the owners
and laborers in the mills which are closed that
they are not allowed to set up a tariff wall around
themselves? Suppose that the cheapening of
production had been accomplished in a foreign
country and was not available here, and then
answer the same questions.
350. " Upon what a narrow and stupid basis
do they discuss this American system of industry !
They speak of it as if it were protection of the
mill owners, of the mine owners, of the proprie-
PROTECTIONISM. Ii;
tors and managers of furnaces and of railroads
and of ships. Why, of course, they have their
share in the workings of industry, but the object
of it all, and the political reason of it all, is that
we mean to protect our wages from being beaten
down by the peasantry or the laborers of foreign
countries, whose dignity, whose manhood, whose
equality is not preserved."
351. " It is not enough to show that iron costs
less in England than it costs here. The question
is whether iron would not cost far more here, if
this country, with its enormous demand, were
dependent upon British manufacturers for iron."
Discuss the argument that we ought to develop
industries at home by protection in order not to
be at the mercy of foreign monopolists.
352. " In the first place, I freely grant that the
enhanced price of the protected articles repre-
sents a loss to the consumers, and through them
to the nation. Against this loss I claim that the
following gains, where they are gains, should be
offset :
First Any effect that protection may have on
the " margin of cultivation."
Second Any effect upon the equation of inter-
national demand.
IlS ECONOMIC PROBLEMS.
Third Any effect upon the employment ot
classes (women and children) who would not
have found employment at all in unprotected
industries.
Fourth Any tendency that engaging in the
protected industries may have in employing
skilled in the place of common labor.
Fifth Any tendency which protection may
have to lead a nation to save rather than borrow
the capital its industries call for.
Sixth -Any influence which protection may
have upon the state of the arts and the progress
of invention, both in the nation and in the world
at large."
Examine these points. Are there such gains?
Can protective taxes win them ?
Mill, III., 17, 5-
353. "We must remember that a worker
may gain more by having his industry protected
than he will lose by having to pay dearly for
what he consumes. A system which raises prices
all round like that in the U. S. at present is
oppressive to consumers, but is most disadvan-
tageous to those who consume without produc-
ing anything, and does little, if any, injury to
those who produce more than they consume/'
PROTECTIONISM. I IQ
354. " Last year, notwithstanding the high
duties, we imported of iron and steel, in their
various forms, a million and a half tons. These
required, for their production, twenty-eight mil-
lion days' work, and if made in our country
would have given steady employment at two
dollars a day, to one hundred thousand men, for
eleven months, and have left all the profits here,
instead of in England.' 1
355. "What I hope I have done is to show
that ' capital ' is subject to the law of supply and
demand. There are many things which affect
the rate at which accumulation will go on. Its
ultimate amount, however, is always limited, at
least as to circulating capital, by the number of
laborers, and the average amount of capital that
can be profitably utilized in employing them.
When accumulations exceed this point one or
more of three things may occur: i. An increase
of laborers. 2. Transferring some of them to
industries in which it takes more capital per
capita to keep laborers at work; or, 3, an ac-
cumulation occurs which depresses profits and
causes an industrial stagnation.
Now, when protection diverts labor from agri-
culture to manufacturing it allows accumulation
to go. on to a point it could not otherwise reach,
120 ECONOMIC PROBLEMS.
because it transfers labor to employments requir-
ing more capital.
The yearly profits on such accumulations are
a pure gain to the country, and a valid offset
against the loss to the consumer, which is the
only economic effect free traders seem able to
comprehend."
356. Criticise the policy of commercial or
reciprocity treaties.
Fawcett, Free Trade, Chap. 6. Baden-Powell, 273-278.
357. The imports of the United States are not
sufficient to give return cargos for the ships
which are required to take out the exports.
Therefore the steamers put in bunks for the
westward passage and compete with each other
for emigrants. Show how the tariff intensifies
this relation of things. What, then, is the effect
of the tariff on the net return for American
wheat and cotton, on immigration, and therefore
on the wages of American wage-receivers?
Cf. Jevons, Coal, 253 fg.
358. Describe the comparative results of free
trade and protection in Victoria and New South
Wales.
Baden-Powell, Chap. V.
PROTECTIONISM. 121
359. The Due dc Broglie wrote a book to
prove that under free trade the " less favored
nations '' would lose population and capital
which would find better employment elsewhere.
To counteract this he would not adopt the pro-
tective system, "nursing father of ignorance,
laziness and routine," but would adopt freedom
of commerce " under the reservation of the ex-
ceptions of which it admits and in the limitations
which science sets for it, and with liberty to
extend the limitations and exceptions according
to national circumstances." Criticise this propo-
sition. If the whole population and capital ot
France should move to Greenland, what harm
would it do to anybody?
360. " It might shake the Victorian protec-
tionist's faith in his own doctrine if he would
reflect that his most effectual protection against
the foreigner would be the exhaustion of his own
gold fields." Why? Put American for Victo-
rian, and wheat and cotton fields for gold fields,
and say if the argument is equally strong.
Cairnes, Essays, 33-40. Cairnes, Principles, 313-31^.
361. If a bounty is paid oi> exports, who pays
it and who gets it?
A-dam Smith, II., 79-86. Fawcett, Free Trade, 16-28.
122 ECONOMIC PROBLEMS.
362. " With a perfectly free trade it would
probably be impossible for any country to refrain
from specializing, while the country that was
economically strongest would certainly gain at
the expense of others, as it would have an advan-
tage in all the bargains of international trade."
Show the fallacy of this passage. Define " eco-
nomically strongest." Note " all the bargains."
Cunningham, 410.
363. " One land would manufacture and an-
other produce raw materials, so that under a
combined regime of perfect free trade no nation
would be likely to consist permanently of a min-
gled population, of whom a large part were en-
gaged in tillage and another large part were in
manfacturing." Show, by a study of the distri-
bution and differentiation of industry inside the
United States, that this deduction is erroneous.
Cunningham, 410.
364. "A simple case will show how a duty may
at once protect the native manufacturer ade-
quately and recoup the country for the expense
of protecting him. Suppose that a 5 per cent,
duty is imposed on foreign silks, and that, in con-
sequence, after a certain interval, half the silks
consumed are the product of native industry, and
PROTECTIONISM. 123
that the price of the whole has risen 2 l / 2 per
cent. It is obvious that, under these circum-
stances, the other half which comes from abroad,
yields the State 5 per cent., while the tax levied
from the consumers on the whole is only 2^ per
cent., so that the nation, in the aggregate, is at
this time losing nothing by protection except the
cost of collecting the tax, while a loss equivalent
to the whole tax falls on the foreign producers."
Show that the above, if generalized, means as
follows : criticise each of the assumptions, and
the practicability of the device ; note that it is
given under the art of political economy :
(i) If a tax of n per cent, is wanted, but (2) if
the tax in question may be used up to produce
onlv of revenue, the rest being surrendered to
J m
protection, and if another tax may be used for
the deficiency, and (3) if the decrease in the total
consumption due to advance in price, be left out
of account, and (4) if we assume that the price
over the whole outside market may be depressed
by the tax, and (5) if the loss and waste of years
in bringing about the desired result be disre-
garded, and (6) if the practical impossibility of
bringing about the supposed state of things be
overlooked, and (7) if the incidence of the tax,
variation in price, etc., be measured by the
price before the tax was laid, without regard
124 ECONOMIC PROBLEMS.
to deterioration in quality after the tax is laid,
then, if a tax of n per cent, causes th of the
m
product to be imported and the price to advance
, the foreigner will pay n per cent, on th
;// m
ot the supply and the consumer will pay per
cent, on the whole of it, which will be equal.
The former will be revenue and the latter can be
devoted to protection.
Show that, if all else were sound, this must be
modified to read: The foreigner would pay part
of the tax, and the domestic consumer might de-
vote to protection a sum equal to that part of the
tax which the foreigner pays.
Show the fallacy of the whole argument. If
the foreigner lowers his price for the protected
market, what is true of the goods which he sends
into that market and of his profits on them?
Does he really pay any of the tax? Show that
the consumer pays revenue n per cent, on im-
;//
ported, and protection n per cent, on the part
m - produced at home.
Sidgwick, 491-492. London Economist, Dec. i, 1883.
PROTECTIONISM. 12$
365. Mr. Ward says that we have now, by our
science of sociology, attained to the matter and
method of scientific education. Here, then, he
thinks, dynamic sociology may begin ; L c., the
State may take measures for the application of
scientific education and thus move on with reg-
ular and uninterrupted steps to the improvement
of society. Criticise this opinion.
366. Show that the improvement of society
depends most of all on an advancing standard of
parenthood. If, then, we could direct our science
of sociology to the object of highest importance,
we should endeavor to determine the moral and
physical elements of a good parent, and to estab-
lish criteria for measuring and defining those ele-
ments. If, then, the State were provided by
science with these criteria, it would have to de-
termine a standard or limit of good parenthood,
and take measures to prevent the marriage of any
persons who were below the standard.
Prove the steps of this reasoning. Show why
the point of view is erroneous, and why the con-
ception of sociology which is here employed is
chimerical. ^??3
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