,note3 ,images of the original pages are available through ,internet ,archive4 ,see https3_/_/archive4org_/details_/distribu tivejust#jjryaniala ,,distributive ,,justice 99 99 99 99 99 ,illustration3 7,,macmillan ,,logo7 ,,the ,,macmillan ,,company ,,new ,,york ,,boston ,,chicago ,,dallas ,,atlanta ,,san ,,francisco ,,macmillan ,,co41 ,,limited ,,london ,,bombay ,,calcutta ,,melbourne ,,the ,,macmillan ,,co4 ,,of ,,canada1 ,,ltd4 ,,toronto 99 99 99 99 99 ,,distributive ,,justice ,the ,right and ,wrong of ,our ,present ,distribution of ,wealth by ,,john ,a4 ,,ryan1 ,d4,d4 ,associate ,professor of ,political ,science at the ,catholic ,university of ,america2 ,professor of ,economics at ,trinity ,college2 ,author of ,a ,living ,wage1 ,alleged ,socialism of the ,church ,fathers1 ,joint ,author with ,morris ,hillquit of ,socialism3 ,promise or ,menace8 ,new ,york ,the ,macmillan ,company #aiaf ,all rights reserved ,nihil ,obstat4 ,,remigius ,,lafort1 ,s4 ,t4 ,d41 ,censor4 ,imprimatur4 ,,john ,,cardinal ,,farley1 ,archbishop of ,new ,york4 ,,copyright1 #aiaf1 ,,by ,,the ,,macmillan ,,company ,set up and electrotyped4 ,published ,november1 #aiaf4 ,,to ,,archbishop ,,ireland ,,in ,,admiration ,,and ,,gratitude ,,preface ,five of the nine members of the late ,federal ,commission on ,industrial ,relations united in the declaration that the first cause of industrial unrest is1 unjust distribution of wealth and income4 ,in all probability this judgment is shared by the majority of the ,american people4 ,regarding the precise nature and extent of the injustice1 however1 there is no such preponderance of opinion4 ,even the makers of ethical and economic treatises fail to give us anything like uniform or definite pronouncements concerning the moral defects of the present distribution4 ,while the ,socialists and the ,single ,taxers are sufficiently positive in their statements1 they form only a small portion of the total population1 and include only an insignificant fraction of the recognised authorities on either ethics or economics4 ,the volume in hand represents an attempt to discuss systematically and comprehensively the justice of the processes by which the product of industry is distributed4 ,inasmuch as the product is actually apportioned among landowners1 capitalists1 business men1 and labourers1 the moral aspects of the distribution are studied with reference to these four classes4 ,while their rights and obligations form the main subject of the book1 the effort is also made to propose reforms that would remove the principal defects of the present system and bring about a larger measure of justice4 ,many treatises have been written concerning the morality of one or other element or section of the distributive process2 for example1 wages1 interest1 monopoly1 the land question2 but1 so far as the author knows1 no attempt has hitherto been made to discuss the moral aspects of the entire process in all its parts4 ,at least1 no such task has been undertaken by any one who believes that the existing economic system is not inherently unjust4 ,that the present essay in this field falls far short of adequate achievement the author fully realises1 but he is sustained by the hope that it will provoke discussion1 and move some more competent person to till the same field in a more thorough and fruitful way4 ,,john ,a4 ,,ryan4 ,the ,catholic ,university of ,america1 ,washington1 ,d4 ,c41 ,june #ad1 #aiaf4 ,,contents ,,preface vii ,,introductory ,,chapter3 ,,the ,,elements ,,and ,,scope ,,of ,,the ,,problem xiii ,general ,references xvii ,,section ,i ,,the ,,morality ,,of ,,private ,,landownership ,,and ,,rent ,,chapter ,,page ,i ,,the ,,landowner',s ,,share ,,of ,,the ,,national ,,product #c ,economic ,rent ,always ,goes to the ,landowner #d ,economic ,rent and ,commercial ,rent #e ,the ,cause of ,economic ,rent #f ,,ii ,,landownership ,,in ,,history #h ,no ,private ,ownership in ,pre-,agricultural ,conditions #aj ,how the ,change ,probably ,took ,place #ab ,limited ,character of ,primitive ,common ,ownership #ad ,private ,ownership ,general in ,historical ,times #ae ,conclusions from ,history #ag ,,iii ,,the ,,arguments ,,against ,,private ,,landownership #ai ,arguments by ,socialists #ai ,henry ,george's ,attack on the ,title of ,first ,occupancy #ba ,his ,defence of the ,title of ,labour #bd ,the ,right of all ,men to the ,bounty of the ,earth #cj ,the ,alleged ,right of the ,community to ,land ,values #ci ,,iv ,,private ,,ownership ,,the ,,best ,,system ,,of ,,land ,,tenure #dh ,the ,socialist ,proposals ,impracticable #dh ,inferiority of the ,single ,tax ,system #ea ,v ,,private ,,landownership ,a ,,natural ,,right #ef ,three ,principal ,kinds of ,natural ,rights #eg ,private ,landownership ,indirectly ,necessary for ,individual ,welfare #ei ,excessive ,interpretations of the ,right of ,private ,landownership #fa ,the ,doctrine of the ,fathers and the ,theologians #fb ,the ,teaching of ,pope ,leo ,,xiii #fd ,,vi ,,limitations ,,of ,,the ,,landowner',s ,,right ,,to ,,rent #fg ,the ,tenant's ,right to a ,decent ,livelihood #fi ,the ,labourer's ,claim ,upon the ,rent #ga ,,vii ,,defects ,,of ,,the ,,existing ,,land ,,system #gd ,landownership and ,monopoly #ge ,excessive ,gains from ,private ,landownership #hj ,exclusion from the ,land #ij ,,viii ,,methods ,,of ,,reforming ,,our ,,land ,,system #id ,the ,leasing ,system #ie ,public ,agricultural ,lands #ig ,public ,ownership of ,urban ,land #ih ,appropriating ,future ,increases of ,land ,value #ajj ,some ,objections to the ,increment ,tax #ajb ,the ,morality of the ,proposal #ajh ,the ,german and ,british ,increment ,taxes #aad ,transferring ,other ,taxes to ,land #aag ,the ,morality of the ,plan #abj ,amount of ,taxes ,practically ,transferable #abb ,the ,social ,benefits of the ,plan #abg ,a ,supertax on ,large ,holdings #acj ,references on ,section ,i #acc ,,section ,,ii ,,the ,,morality ,,of ,,private ,,capital ,,and ,,interest ,,ix ,,the ,,nature ,,and ,,the ,,rate ,,of ,,interest #acg ,meaning of ,capital and ,capitalist #acg ,meaning of ,interest #ach ,the ,rate of ,interest #ada ,x ,,the ,,alleged ,,right ,,of ,,labour ,,to ,,the ,,entire ,,product ,,of ,,industry #ade ,the ,labour ,theory of ,value #adf ,the ,right of ,productivity #adi ,,xi ,,the ,,socialist ,,scheme ,,of ,,industry #aeb ,socialist ,inconsistency #aeb ,expropriating the ,capitalists #aed ,inefficient ,industrial ,leadership #aeh ,inefficient ,labour #afb ,attempted ,replies to ,objections #afb ,restricting ,individual ,liberty #afh ,,xii ,,alleged ,,intrinsic ,,justifications ,,of ,,interest #aga ,attitude of the ,church ,toward ,interest on ,loans #agb ,interest on ,productive ,capital #age ,the ,claims of ,productivity #agg ,the ,claims of ,service #aha ,the ,claims of ,abstinence #ahb ,,xiii ,,social ,,and ,,presumptive ,,justifications ,,of ,,interest #ahg ,limitations of the ,sacrifice ,principle #ahg ,the ,value of ,capital in a ,no-,interest ,rgime #ahh ,whether the ,present ,rate of ,interest is ,necessary #aia ,whether at ,least two ,per ,cent4 is ,necessary #aic ,whether any ,interest is ,necessary #aif ,the ,state is ,justified in ,permitting ,interest #aii ,civil ,authorisation not ,sufficient for ,individual ,justification #bja ,how the ,interest-,taker is ,justified #bjd ,,xiv ,,co-,,operation ,a ,,partial ,,solvent ,,of ,,capitalism #baj ,reducing the ,rate of ,interest #baa ,need for a ,wider ,distribution of ,capital #bac ,the ,essence of ,co-operative ,enterprise #bad ,co-operative ,credit ,societies #baf ,co-operative ,agricultural ,societies #bag ,co-operative ,mercantile ,societies #bbj ,co-operation in ,production #bbb ,advantages and ,prospects of ,co-operation #bbh ,references on ,section ,,ii #bcc ,,section ,,iii ,,the ,,moral ,,aspect ,,of ,,profits ,,xv ,,the ,,nature ,,of ,,profits #bcg ,the ,functions and ,rewards of the ,business ,man #bcg ,the ,amount of ,profits #bci ,profits in a ,joint-,stock ,company #bda ,,xvi ,,the ,,principal ,,canons ,,of ,,distributive ,,justice #bdc ,the ,canon of ,equality #bdc ,the ,canon of ,needs #bdd ,the ,canon of ,efforts and ,sacrifice #bdf ,the ,canon of ,productivity #bdg ,the ,canon of ,scarcity #bej ,the ,canon of ,human ,welfare #beb ,,xvii ,,just ,,profits ,,in ,,conditions ,,of ,,competition #bed ,the ,question of ,indefinitely ,large ,profits #bee ,the ,question of ,minimum ,profits #beh ,the ,question of ,superfluous ,business ,men #bfj ,,xviii ,,the ,,moral ,,aspect ,,of ,,monopoly #bfb ,surplus and ,excessive ,profits #bfc ,the ,question of ,monopolistic ,efficiency #bfe ,discriminative ,underselling #bfg ,exclusive-,sales ,contracts #bgj ,discriminative ,transportation ,arrangements #bgb ,natural ,monopolies #bgc ,methods of ,preventing ,monopolistic ,injustice #bge ,legalised ,price ,agreements #bgg ,,xix ,,the ,,moral ,,aspects ,,of ,,stockwatering #bgi ,injurious ,effects of ,stockwatering #bha ,the ,moral ,wrong #bhd ,the ,innocent ,investor #bhf ,magnitude of ,overcapitalisation #bhh ,,xx ,,the ,,legal ,,limitation ,,of ,,fortunes #bia ,the ,method of ,direct ,limitation #bib ,limitation ,through ,progressive ,taxation #bif ,the ,proper ,rate of ,income and ,inheritance ,taxes #bii ,effectiveness of ,such ,taxation #cjj ,,xxi ,,the ,,duty ,,of ,,distributing ,,superfluous ,,wealth #cjc ,the ,question of ,distributing ,some #cjc ,the ,question of ,distributing ,all #cjh ,some ,objections #caa ,a ,false ,conception of ,welfare and ,superfluous ,goods #cad ,the ,true ,conception of ,welfare #caf ,references on ,section ,,iii #cah ,,section ,,iv ,,the ,,moral ,,aspects ,,of ,,wages ,,xxii ,,some ,,unacceptable ,,theories ,,of ,,wage-,,justice #cbc ,i ,the ,prevailing-,rate ,theory #cbc ,not in ,harmony with ,justice #cbe ,,ii ,exchange-,equivalence ,theories #cbf ,the ,rule of ,equal ,gains #cbf ,the ,rule of ,free ,contract #cbh ,the ,rule of ,market ,value #ccj ,the ,medival ,theory #ccb ,a ,modern ,variation of the ,medival ,theory #ccg ,,iii ,productivity ,theories #cdj ,labour's ,right to the ,whole ,product #cda ,clark's ,theory of ,specific ,productivity #cdg ,carver's ,modified ,version of ,productivity #cea ,,xxiii ,,the ,,minimum ,,of ,,justice2 ,a ,,living ,,wage #cef ,the ,principle of ,needs #cef ,three ,fundamental ,principles #ceh ,the ,right to a ,decent ,livelihood #cfj ,the ,claim to a ,decent ,livelihood from a ,present ,occupation #cfb ,the ,labourer's ,right to a ,living ,wage #cfc ,when the ,employer is ,unable to ,pay a ,living ,wage #cff ,an ,objection and ,some ,difficulties #cgj ,the ,family ,living ,wage #cgc ,other ,arguments in ,favour of a ,living ,wage #cgf ,the ,money ,measure of a ,living ,wage #cgh ,,xxiv ,,the ,,problem ,,of ,,complete ,,wage ,,justice #cha ,comparative ,claims of ,different ,labour ,groups #cha ,wages ,versus ,profits #chh ,wages ,versus ,interest #cij ,wages ,versus ,prices #cic ,concluding ,remarks #cih ,,xxv ,,methods ,,of ,,increasing ,,wages #djj ,the ,minimum ,wage in ,operation #djj ,the ,question of ,constitutionality #dje ,the ,ethical and ,political ,aspects #djg ,the ,economic ,aspect #djh ,opinions of ,economists #dab ,other ,legislative ,proposals #daf ,labour ,unions #dag ,organisation ,versus ,legislation #dbj ,participation in ,capital ,ownership #dbc ,references on ,section ,,iv #dbe ,,xxvi ,,summary ,,and ,,conclusion #dbf ,the ,landowner and ,rent #dbf ,the ,capitalist and ,interest #dbg ,the ,business ,man and ,profits #dbh ,the ,labourer and ,wages #dcj ,concluding ,observations #dca ,,index #dec ,,introductory ,,chapter ,,the ,,elements ,,and ,,scope ,,of ,,the ,,problem ,distributive justice is primarily a problem of incomes rather than of possessions4 ,it is not immediately concerned with ,john ,brown's railway stock1 ,john ,white's house1 or ,john ,smith's automobile4 ,it deals with the morality of such possessions only indirectly and under one aspect2 that is1 in so far as they have been acquired through income4 ,moreover1 it deals only with those incomes that are derived from participation in the process of production4 ,for example2 it considers the labourer's wages1 but not the subsidies that he may receive through charity or friendship4 ,its province is not the distribution of all the goods of the country among all the people of the country1 but only the distribution of the products of industry among the classes that have taken part in the making of these products4 ,these classes are four1 designated as landowners1 capitalists1 undertakers or business men1 and labourers or wage earners4 ,the individual member of each class is an agent of production1 while the instrument or energy that he owns and contributes is a factor of production4 ,thus1 the landowner is an agent of production because he contributes to the productive process the factor known as land1 and the capitalist is an agent of production because he contributes the factor known as capital2 while the business man and the labourer are agents not only in the sense that they contribute factors to the process1 but in the very special sense that their contributions involve the continuous expenditure of human energy4 ,now the product of industry is distributed among these four classes precisely because they are agents of production2 that is because they own and put at the disposal of industry the indispensable factors of production4 ,we say that the agents of production put the factors of production at the disposal of industry1 rather than exercise or operate the factors1 because neither the landowner nor the capitalist1 as such1 expend continuous energy in the productive process4 ,all that is necessary to enforce a claim upon the product is to contribute an instrument or factor without which production cannot be carried on4 ,the product distributed in any country during a single year is variously described by economists as the national product1 the national income1 the national dividend4 ,it consists not merely of material goods1 such as houses1 food1 clothing1 and automobiles1 but also of those non-material goods known as services4 ,such are the tasks performed by the domestic servant1 the barber1 the chauffeur1 the public official1 the physician1 the teacher2 or any other personal service that is valued1 as material commodities are valued1 according to their selling prices4 ,even the services of the clergyman are included in the national income or product1 since they are paid for and form a part of the annual supply of good things produced and distributed within the country4 ,in the language of the economist1 anything that satisfies a human want is a utility1 and forms part of the national wealth2 hence there can be no sufficient reason for excluding from the national income goods which minister to spiritual or intellectual wants4 ,the services of the clergyman1 the actor1 the author1 the painter1 and the physician are quite as much a part of the utilities of life as the services of the cook1 the chambermaid1 or the barber2 and all are as clearly utilities as bread1 hats1 houses1 or any other material thing4 ,in a general way1 therefore1 we say that the national product which is available for distribution among the different productive classes comprises all the utilities1 material and non-material1 that are produced through human agents and satisfy human desires4 ,in the great majority of instances the product is not distributed in kind4 ,the wheat produced on a given farm is not directly apportioned among the farmers1 labourers1 and landowners that have co-operated in its production2 nor are the shoes turned out by a given factory divided among the co-operating labourers and capitalists2 and it is obvious that personal services cannot be returned to the persons that have rendered them4 ,cases of partial direct distribution do1 indeed1 occur2 as when the tenant takes two-thirds and the landowner one-third of the crop raised by the former on land belonging to the latter2 or when the miller receives his compensation in a part of the flour that he grinds4 ,to-day1 however1 such instances are relatively insignificant4 ,by far the greater part of the material product is sold by the undertaker or business man1 and the price is then divided between himself and the other agents of production4 ,all personal services are sold1 and the price is obtained by the performers thereof4 ,the farmer sells his wheat1 the miller his flour1 and the barber his services4 ,with the money received for his part in production each productive agent obtains possession of such kinds and amounts of the national product as his desires dictate and his income will procure4 ,hence the distribution of the product is effected through the conversion of producers' claims into money1 and the exchange of the latter for specific quantities and qualities of the product4 ,while the national product as a whole is divided among the four productive classes1 not every portion of it is distributed among actually distinct representatives of these classes4 ,when more than one factor of production is owned by the same person1 the product will obviously not go to four different classes of persons4 ,for example2 the crop raised by a man on his own unmortgaged land1 with his own instruments1 and without any hired assistance2 and the products of the small shopkeeper1 tailor1 and barber who are similarly self sufficient and independent1--are in each case obtained by one person1 and do not undergo any actual distribution4 ,even in these instances1 however1 there occurs what may be called virtual distribution1 inasmuch as the single agent owns more than one factor1 and performs more than one productive function4 ,and the problem of distributive justice in such cases is to determine whether all these productive functions are properly rewarded through the total amount which the individual has received4 ,where the factors are owned by distinct persons1 or groups of persons1 the problem is to determine whether each group is properly remunerated for the single function that it has performed4 ,the problem of the morality of industrial incomes is obviously complex4 ,for example2 the income of the farmer is sometimes derived from a product which he must divide with a landowner and with labourers2 sometimes from a product which he shares with labourers only2 and sometimes from a product which he can retain wholly for himself4 ,the labourer's income arises sometimes out of a product which he divides with other agents of production2 sometimes out of a product which he divides with other labourers as well as other agents2 and sometimes out of a product of which he receives the full money equivalent4 ,the complexity of the forces determining distribution and income indicate a complexity in the forces affecting the morality of income4 ,moreover1 there is the more fundamental ethical question concerning the titles of distribution3 whether mere ownership of a factor of production gives a just claim upon the product1 as in the case of the landowner and the capitalist2 whether such a claim1 assuming it to be valid1 is as good as that of the labourer and the business man1 who expend human energy in the productive process2 whether different kinds of productive activity should be rewarded at different rates2 and if so in what proportion4 ,why should the capitalist receive six per cent41 rather than two per cent41 or sixteen per cent48 ,why should the locomotive engineer receive more than the trackman8 ,why should not all persons be compensated equally8 ,should all or any of the benefits of industrial improvements go to the consumer8 ,such are typical questions in the study of distributive justice4 ,they are sufficient to give some idea of the magnitude and difficulty of the problem4 ,scarcely less formidable is the task of suggesting means to correct the injustices of the present distribution4 ,the difficulties in this part of the field are indicated by the multiplicity of social remedies that have been proposed1 and by the fact that none of them has succeeded in winning the adhesion of more than a minority of the population4 ,we shall be obliged not only to pass moral judgment upon the most important of these proposals1 but to indicate and advocate a more or less complete and systematic group of such reforms as seem to be at once feasible and righteous4 ,,general ,,references ,,taussig3 ,principles of ,economics4 ,macmillan2 #aiaa4 ,,devas3 ,political ,economy4 ,longmans2 #aija4 ,,hobson3 ,the ,industrial ,system4 ,longmans2 #aiji4 ,,clark3 ,the ,distribution of ,wealth4 ,macmillan2 #ahii4 ,,smart3 ,the ,distribution of ,income4 ,london2 #ahii4 ,,willoughby3 ,social ,justice4 ,macmillan2 #aijj4 ,,carver3 ,essays in ,social ,justice4 ,harvard ,university ,press2 #aiae4 ,,ely3 ,property and ,contract in ,their ,relations to the ,distribution of ,wealth4 ,macmillan2 #aiad4 ,,nearing3 ,income4 ,macmillan2 #aiae4 ,,streightoff3 ,the ,distribution of ,incomes in the ,united ,states4 ,longmans2 #aiab4 ,,wagner3 ,grundlegung der ,nationaloekonomie4 ,leipzig2 #ahib-ahid4 ,,pesch3 ,lehrbuch der ,nationaloekonomie4 ,freiburg2 #aije-aiac4 ,,antoine3 ,cours d'conomie ,sociale4 ,paris2 #ahii4 ,,hitze3 ,capital et ,travail4 ,louvain2 #ahih4 ,,hollander3 ,the ,abolition of ,poverty4 ,houghton ,mifflin ,company2 #aiad4 ,,ellwood3 ,the ,social ,problem4 ,macmillan2 #aiae4 ,,garriguet3 ,the ,social ,value of the ,gospel4 ,herder2 #aiaa4 ,,parkinson3 ,a ,primer of ,social ,science4 ,devin-,adair ,co42 #aiac4 ,,vermeersch3 ,quaestiones de ,justitia4 ,bruges2 #aija4 ,,king3 ,the ,wealth and ,income of the ,people of the ,united ,states4 ,macmillan2 #aiae4 ,,commission ,,on ,,industrial ,,relations4 ,final ,report2 #aiae4 ,,section ,i ,,the ,,morality ,,of ,,private ,,landownership ,,and ,,rent ,,distributive ,,justice ,,chapter ,i ,,the ,,landowner',s ,,share ,,of ,,the ,,national ,,product ,that part of the national product which represents land1 and is attributed specifically to land1 goes to the landowner4 ,it is called economic rent1 or simply rent4 ,we say that rent is attributed specifically to land1 rather than is produced specifically by land1 because we do not know what proportion of the joint product of the different factors of production exactly reflects the productive contribution of any factor4 ,economic rent represents the productivity of land in so far as it indicates what men are willing to pay for land-use in the productive process4 ,in any particular case rent comes into existence because the land makes a commercially valuable contribution to the product2 and it goes to the landowner because this is one of the powers or rights included in the institution of private ownership4 ,and the landowner's share is received by him precisely in his capacity as landowner1 and not because he may happen to be labourer1 farmer1 or proprietor of agricultural capital4 ,it is perhaps superfluous to observe that not all land produces rent4 ,while almost all land is useful and productive1 at least potentially1 there is in almost every locality some land which in present conditions does not warrant men in paying a price for its use4 ,if the crop raised on very sandy soil is so small as to cover merely the outlay for labour and capital1 men will not pay rent for the use of that soil4 ,yet the land has contributed something to the product4 ,herein we have another indication that rent is not an adequate measure of land productivity4 ,it merely represents land value1--at a given time1 in given circumstances4 ,economic ,rent ,always ,goes to the ,landowner ,all land that is in use1 and for the use of which men are willing to pay a price yields rent1 whether it is used by a tenant or by the owner4 ,in the latter case the owner may not call the rent that he receives by that name2 he may not distinguish between it and the other portions of the product that he gets from the land2 he may call the entire product profits1 or wages4 ,nevertheless the rent exists as a surplus over that part of the product that he can regard as the proper return for his labour1 and for the use of his capital-instruments1 such as1 horses1 buildings1 and machinery4 ,if a farmer employs the same amount and kind of labour and capital in the cultivation of two pieces of land1 one of which he owns1 the other being hired from some one else2 if his net product is the same in both cases1 say1 #a1jjj dollars2 and if he must pay #bjj dollars to the owner of the hired land1--then1 #bjj of the #a1jjj dollars that he receives from his own land1 is likewise to be attributed specifically to his land rather than to his capital or labour4 ,it is rent4 ,while the whole product is due in some degree to the productive power of land1 #bjj dollars of it represents land value in the process of production1 and goes to him solely in his capacity as landowner4 ,the rent that arises on land used for building sites is of the same general character1 and goes likewise to the owner of the land4 ,the owner of the site upon which a factory is located may hire it to another for a certain sum annually1 or he may operate the factory himself4 ,in either case he receives rent1 the amount that the land itself is worth for use1 independently of the return that he obtains for his expenditure of capital and labour4 ,even when a person uses his land as a site for a dwelling which he himself occupies1 the land still brings him economic rent1 since it affords him something for which he would be obliged to pay if his house were located on land of the same kind owned by some one else4 ,economic ,rent and ,commercial ,rent ,it will be observed that the landowner's share of the product1 or economic rent1 is not identical with commercial rent4 ,the latter is a payment for land and capital1 or land and improvements1 combined4 ,when a man pays nine hundred dollars for the use of a house and lot for a year1 this sum contains two elements1 economic rent for the lot1 and interest on the money invested in the house4 ,assuming that the house is worth ten thousand dollars1 and that the usual return on such investments is eight per cent41 we see that eight hundred dollars goes to the owner as interest on his capital1 and only one hundred dollars as rent for his land4 ,similarly the price paid by a tenant for the use of an improved farm is partly interest on the value of the improvements1 and partly economic rent4 ,in both cases the owner may reckon the land as so much capital value1 and the economic rent as interest thereon1 just as the commercial rent for the buildings and other improvements is interest on their capital value2 but the economist distinguishes between them because he knows that they are determined by different forces1 and that the distinction is of importance4 ,he knows1 for example1 that the supply of land is fixed1 while the supply of capital is capable of indefinite increase4 ,in many situations1 therefore1 rent increases1 but interest remains stationary or declines4 ,sometimes1 though more rarely1 the reverse occurs4 ,as we shall see later1 this and some other specific characteristics of land and rent have important moral aspects2 consequently the moralist cannot afford to confuse rent with interest4 ,the ,cause of ,economic ,rent ,the cause of economic rent is the fact that land is limited relatively to the demand for it4 ,if land were as plentiful as air mere ownership of some portion of it would not enable the owner to collect rent4 ,as landowner he would receive no income4 ,if he cultivated his land himself the return therefrom would not exceed normal compensation for his labour1 and normal interest on his capital4 ,since no one would be compelled to pay for the use of land1 competition among the different cultivators would keep the price of their product so low that it would merely reimburse them for their expenditures of capital and labour4 ,in similar conditions no rent would arise on building sites4 ,the cause of the amount of rent may also be stated in terms of scarcity4 ,at any given time and place1 the rent of a piece of land will be determined by the supply of that kind of land relatively to the demand for it4 ,however1 the demand itself will be regulated by the fertility or by the location of the land in question4 ,two pieces of agricultural land equally distant from a city1 but of varying fertility1 will yield different rents because of this difference in natural productiveness4 ,two pieces of ground of equal natural adaptability for building sites1 but at unequal distances from the centre of a city1 will produce different rents on account of their difference of location4 ,the absolute scarcity of land is1 of course1 fixed by nature2 its relative scarcity is the result of human activities and desires4 ,the definition of rent adopted in these pages1 what men are willing to pay for the use of land1 or1 what land is worth for use1 is simpler and more concrete1 though possibly less scientific1 than those ordinarily found in manuals of economics1 namely3 that portion of the product that remains after all the usual expenditures for labour1 capital1 and directive ability have been deducted2 or1 the surplus which any piece of land yields over the poorest land devoted to the same use1 when the return from the latter is only sufficient to cover the usual expenses of production4 ,the statement that all rent goes to the landowner supposes that1 in the case of hired land1 the tenant pays the full amount that would result from competitive bidding4 ,evidently this was not the case under the feudal system1 when rents were fixed by custom and remained stationary for centuries4 ,even to-day1 competition is not perfect1 and men often obtain the use of land for less than they or others might have been willing to give4 ,but the statement in question does describe what tends to happen in a system of competitive rents4 ,before discussing the morality of the landowner's income1 and of rent receiving1 we may with profit glance at the history of land tenure4 ,thus we shall get some idea1 first1 of the antiquity of the present system1 and1 second1 of its effects upon individual and social welfare4 ,both these considerations have an important bearing upon the moral problem2 for length of existence creates a presumption in favour of the social1 and therefore the moral1 value of any institution2 and past experience is our chief means of determining whether an institution is likely to be socially beneficial1 and therefore morally right1 in the future4 ,,chapter ,,ii ,,landownership ,,in ,,history ,thirty or thirty-five years ago1 the majority of economic historians seemed to accept the theory that land was originally owned in common4#a ,they held that in the beginning the community1 usually a village community1 was the landowner2 that the community either cultivated the land as a corporation1 and distributed the product among the individual members1 or periodically divided the land among the social units1 and permitted the latter to cultivate their allotments separately4 ,the second of these forms of tenure was the more general4 ,the primitive time to which the theory referred was not the period when men got their living by hunting and fishing1 or by rearing herds1 but the agricultural stage of economic development1 when life had become settled4 ,of the arguments upon which the theory was based1 some consisted of ambiguous statements by ancient writers1 such as ,plato1 ,csar1 and ,tacitus1 and others were merely inferences drawn from the existence of certain agrarian institutions3 family ownership of land2 common pasture lands and woodlands2 periodical distribution of land among the cultivators1 as in the ,german ,mark1 the ,russian ,mir1 the ,slavonic ,zadruga1 and the ,javanese ,dessa4 ,all these practices have been interpreted as survivals of primitive common ownership4 ,only on this hypothesis1 it is argued1 can they be satisfactorily explained4 ,more recent writers have subjected the various arguments for this theory to a searching criticism4#b ,to-day the great majority of scholars would undoubtedly accept the conclusion of ,fustel de ,coulanges1 that the arguments and evidence are not sufficient to prove that in the earliest stages of agricultural life land was held in common2 and a majority would probably take the more positive ground that common ownership in the sense of communal cultivation and distribution1 never existed for any considerable length of time among any agricultural people4 ,the present authoritative opinion on the subject is thus summarized by ,professor ,ashley3 ,from the earliest historical times1 in ,gaul and ,germany1 very much land was owned individually1 and wealth on one side and slavery on the other were always very important factors in the situation4 ,even in ,germany1 communal ownership of land was never a fundamental or generally pervasive social institution2 there was something very much like large private estates1 worked by dependents and slaves1 from the very earliest days of ,teutonic ,settlement4 ,as to ,england1 it is highly probable that we shall not find anything that can fairly be called a general communal system of landowning1 combined with a substantial equality among the majority of the people1 under conditions of settled agriculture4 ,to find it in any sense we shall have to go back to an earlier and 'tribal' condition1 if1 indeed1 we shall find it there6#c ,no ,private ,ownership in ,pre-,agricultural ,conditions ,whenever and wherever men got their living by hunting and fishing1 there was no inducement to own land privately1 except possibly those portions upon which they built their huts or houses4 ,until they become more or less an agricultural people they are usually hunters or fishermen or both1 and possibly also to a limited extent keepers of sheep and cattle4 ,population is then sparse and unoccupied territory is plentiful1 and questions of the ownership of particular tracts of land do not concern them4#d ,in any region occupied by a group or tribe1 all portions of the land and the water were about equally productive of game and fish2 the amount obtainable by any individual had no relation to labour on any particular piece of soil2 and it was much easier for each to range over the whole region in common with his fellows than to mark off a definite section upon which he would not permit others to come1 but beyond which he himself would not be permitted to go4 ,in such conditions private ownership of land would have been folly4 ,tribal or group ownership was1 however1 in vogue1 especially among those groups that were in control of the better grounds or streams4 ,even this form of proprietorship was comparatively unstable1 since the people were to a considerable degree nomadic1 and were willing to abandon present possessions whenever there was a prospect of obtaining better ones elsewhere4 ,among men who got their living by rearing herds1 the inducement to hold land in exclusive private control would be somewhat stronger4 ,the better grazing tracts would be coveted by many different persons1 especially in the more populous communities4 ,and there would always be the possibility of confusion among the different herds1 and contention among their owners4 ,in such circumstances the advantages of exclusive control would sometimes outweigh the benefits of common use and ownership4 ,in the thirteenth chapter of ,genesis we are told that1 owing to strife between the herdsmen of ,abram and ,lot1 the brothers separated1 and agreed to become the exclusive possessors of different territories4 ,nevertheless1 it is probable that tribal ownership was the prevailing form of land tenure so long as people remained mainly in pastoral conditions4 ,it is likewise probable that the same system continued in many cases for some time after men began to cultivate the soil4 ,at least1 this would seem to have been the natural arrangement while land was plentiful1 and the methods of cultivation crude and soil-exhausting4 ,it would be more profitable to take up new lands than to continue upon the old4 ,within historical times this system prevailed among the ancient ,germans1 some of the tribes of ,new ,zealand1 and some of the tribes of ,western ,africa4 ,where land was not so plentiful it was sometimes redistributed among individuals or heads of families1 as often as a death occurred or a new member arrived in the community4 ,some of the tribes and peoples who observed this practice were the ancient ,irish1 the aborigines of ,peru1 ,mexico1 and parts of what is now the ,united ,states1 and ,australia1 and some of the tribes of ,africa1 ,india1 and ,malaysia4#e ,whether the most primitive agricultural systems of every people were of this nature we have1 of course1 no means of knowing1 but the supposition is antecedently probable2 for agriculture must have begun very gradually1 and been for some time practised in connection with the more primitive methods of obtaining a livelihood4 ,as the land had been held for the most part in common during the hunting and fishing stage and during the pastoral stage1 the same arrangement would probably continue until the people found it necessary to cultivate the same tracts of land year after year1 and conceived the desire to retain their holdings in stable possession and to transmit them to their children4 ,moreover1 so long as the members of the clan remained strongly conscious of their kinship1 and realised the necessity of acting as a unit against their enemies1 there would be a strong incentive to clan ownership of the land1 and clan allotment of it among the individual members4 ,in other words1 the clan would1 in these circumstances1 have the same motives for common ownership that exist to-day in the family4 ,the oldest historical peoples1 the ,israelites1 ,egyptians1 ,assyrians1 ,babylonians1 and ,chinese1 had private ownership of land at the beginning of their recorded history4 ,most of them1 however1 had been cultivating land for a considerable length of time1 and had acquired a considerable degree of civilisation1 before the earliest period of their existence of which we have any knowledge4 ,it is quite possible that those among them that had passed through the hunting and fishing or the pastoral stage of existence1 had practised tribal or common ownership during the earlier portion of their agricultural life4 ,how the ,change ,probably ,took ,place ,the change from tribal to private landownership could have occurred in a great variety of ways4 ,for example1 the chief1 patriarch1 or king might have gradually obtained greater authority in making the allotments of land among the members of the tribe or group1 and thus acquired a degree of control over the land which in time became practical ownership2 he might have seized the holdings of deceased persons1 or of those who were unable to pay him the tax or tribute that he demanded1 or of those who were for any reason obnoxious to him4 ,again1 the taxes paid to the chief man in a community for his services as ruler might have come in time to be regarded as a payment for the use of the land1 and therefore as an acknowledgment that the chief was also the landlord4 ,even in the ,middle ,ages the rents received by the feudal lords were in great measure a return for social and political services1 just as are the taxes received to-day from private landowners by the ,state4 ,in primitive times1 as well as later on1 the chief would naturally do his best to convert this institution of tax paying or tribute paying into rent paying1 and to add the position of landowner to his other prerogatives4 ,after all1 the transition from tribal ownership1 with private cultivation and private receipt of the produce of individual allotments1 to overlordship and landlordism1 would not have been greater than that which actually took place in ,england between the fifteenth and the nineteenth centuries1 when the lords became absolute owners of land that they had previously held with their tenants in a sort of divided or dual ownership4 ,in a word1 tribal ownership could have been displaced by landlordism through the same methods that have been used everywhere by the powerful1 the ambitious1 and the greedy against the weak1 the indifferent1 and the upright4 ,nor must we forget the influence of conquest4 ,most of the countries that appear in historical times with a system of private ownership had at some previous period been subjugated by an alien people4 ,in many of these the conquerors undoubtedly introduced a considerable degree of individual ownership1 the more powerful among them becoming landlords1 while their weaker companions and the mass of the conquered population were established in a condition of tenancy4 ,where a somewhat widely diffused private ownership succeeded the primitive system1 it was probably due to the free action of the cultivators1 as soon as they came to realise the inconveniences of ownership in common4 ,any enclosed land round their permanent dwellings1 and any land outside the settlement which was cleared1 reclaimed1 and cultivated1 or occupied with cattle by individuals or families1 was recognised as their personal property4 ,only those who were industrious1 enterprising1 and courageous enough would clear1 occupy1 retain1 cultivate1 and defend waste land4 ,they would become personal owners of cattle1 and would gradually acquire wealth which would enable them to employ others and still further improve their position4 ,as their power increased1 and as population grew1 the bravest1 wealthiest1 and most capable fighting men amongst them would become chiefs or a species of nobles1 and the force of circumstances1 often no doubt aided by force and fraud1 would eventually make them the landowners of the greater part of the district1 with the more or less willing acquiescence and consent of the community amongst whom they lived1 and to whom they extended their protection4#f ,limited ,character of ,primitive ,common ,ownership ,a great deal of the opposition to the theory of primitive common ownership of agricultural land1 seems to be based upon an exaggerated conception of the scope of that institution4 ,the average man who thinks or speaks of ownership to-day has in mind the ,roman concept and practice of private property4 ,this includes the unrestricted right of disposal2 that is1 the power to hold permanently1 to transfer or transmit1 to use or to abuse or not to use at all1 to retain the product of the owner's use1 to rent the property to any person and for any period that the owner chooses1 and to obtain a price in return called rent4 ,any man who takes the theory of primitive common ownership to imply that the community or tribe exercised all these powers over its land1 will have no difficulty in proving that the evidence is overwhelmingly against any such theory4 ,even among those people that are certainly known to have practised so-called common ownership of land1 there are very few instances of communal cultivation1 or communal distribution of the product4 ,yet these are included in the ,roman concept of ownership4 ,the usual method seems to have been periodical allotment by the community of the land among individuals1 individual cultivation of the allotted tracts1 and individual ownership of the product4 ,moreover1 there was always a chief or patriarch who exercised considerable authority in the distribution of the land1 frequently collected a rent or tax from the cultivators1 and almost invariably exercised something like private ownership of a portion of the land for his direct and special benefit4 ,sometimes other men of importance in the community possessed land which was not subject to the communal allotment4 ,primitive ownership of land in common was1 therefore1 very far from vesting in the community all the powers that inhere in the private proprietor of land according to the ,roman law and usage4 ,private ,ownership ,general in ,historical ,times ,so much for land tenure in prehistoric times4 ,during the historical period of the existence of the race1 almost all civilised peoples have practised some form of private ownership in the matter of their arable lands4 ,while differing considerably at various times and places1 it has always excluded communal allotment of land and communal distribution of the product1 and has always included private receipt of the product by the owner-user1 or private receipt of rent when the owner transferred the use to some one else4 ,but it did not always include the right to determine who should be the user4 ,in the later centuries of the feudal system1 for example1 the lord could not always expel the tenants from the land1 nor prevent them from transmitting the use of it to their children4 ,moreover1 the rent that he received was customary and fixed1 not competitive and arbitrary1 and it was looked upon in great measure as a return to the lord for social1 military1 and political services1 as well as a payment for the use of land4 ,this system was private ownership1 indeed1 but if we apply the ,roman notion of ownership we shall find it difficult to decide whether the tenant or the lord should more properly be called the owner4 ,at any rate1 the right of ownership possessed by the lord was greatly limited by restrictions which favoured the masses of the cultivators4 ,in every community there were common wood lands and pasture lands for the free use of all the inhabitants4 ,among other restrictions of private ownership and control in favour of the principle of equal access to the land by all persons1 we may mention the division of the ,english villein's holding into several portions1 intermingled with those of his neighbours1 so that each would have about the same amount of good land2 and the ancient ,hebrew law whereby alienated land was returned to the descendants of its original owners every fifty years4#g ,reckoning the feudal lord1 and all other overlords who had the same control over land1 as private proprietors1 we may say that in historical times the arable land of every country has been owned by a minority of the population4 ,since the downfall of feudalism1 the tendency in most regions of the ,western world has been toward an increase in the number of owners1 and a decrease in the number of great estates4 ,this tendency has been especially marked during the last one hundred years4 ,it will1 however1 need to continue for a very long time1 or else to increase its pace very rapidly1 before land ownership will be diffused in anything like the measure that is necessary if its benefits are to be shared by all the people4 ,even in the ,united ,states1 where the distribution is perhaps more general than in any other country1 only #ch4d per cent4 of the families in towns and cities owned1 in #aiaj1 the homes in which they lived1 and therefore the land upon which their homes were located4 ,in the rural districts the per cent4 of home-owning families was only #fb4h4 ,conclusions from ,history ,what conclusions does history warrant concerning the social and moral value of private landownership8 ,here we are on very uncertain ground2 for different inferences may be drawn from the same group of facts if a different section of them be selected for emphasis4 ,sir ,henry ,maine and ,henry ,george both accepted the theory of primitive agrarian communism1 but the former saw in this assumed fact a proof that common ownership was suited only to the needs of rude and undeveloped peoples1 while the latter regarded it as a sure indication that common ownership was fundamentally natural and in accordance with permanent social welfare4 ,the fact that practically all peoples whose history we know discarded communal for private ownership as soon as they had acquired a moderate degree of proficiency in methods of cultivation and in the arts of civilised life does1 indeed1 create a presumption that the latter system is the better for civilised men4 ,to this extent ,sir ,henry ,maine is right4 ,against this presumption ,henry ,george maintained that common ownership was abandoned solely because of the usurpation1 fraud1 and force employed by the powerful and privileged classes4 ,undoubtedly this factor played a great part in bringing about the private ownership that has existed and still exists1 but it does not account for the institution as a whole and everywhere4 ,if chiefs1 kings1 and other powerful personages had never usurped control of the land1 if no people had ever conquered the territory of another1 it is probable that private ownership would have taken place to the same extent1 although it would have been much more widely diffused4 ,for the system of periodical repartition of land1 to say nothing of communal cultivation and communal distribution of the product1 does hinder that attachment to a particular portion of the soil and that intensive cultivation which are so necessary to the best interests of the cultivator1 the most productive use of the land1 and therefore the welfare of society4 ,on the other hand1 the limitations on the right of private ownership which have been established in so many places and times in favour of those who were not owners1 show that men have very generally looked upon land as in some measure the inheritance of all the people4 ,hence arises the presumption that this conviction is but the reflection of fundamental and permanent human needs4 ,summing up the matter1 we may say that the history of land tenure points on the whole to the conclusion that private ownership is socially and individually preferable to agrarian communism1 but that it should be somewhat strictly limited in the interest of the non-owners1 and of the community as a whole4 ,,footnotes3 #a ,the most notable exponents of this view were3 ,von ,maurer1 ,einleitung zur ,geschichte der ,mark1 #ahed2 ,viollet1 ,bibliotheque de l'cole des chartres1 #ahgb2 ,maine1 ,village ,communities in the ,east and the ,west1 #ahgb2 and ,de ,laveleye1 ,de la proprit et ses formes primitives1 #ahgd1 of which an ,english translation appeared in #ahgh under the title1 ,primitive ,property4 #b ,chief among these writers are3 ,fustel de ,coulanges in an article in ,revue des ,questions ,historiques1 ,april1 #ahhi2 translated by ,margaret ,ashley1 and published with an introductory chapter by ,w4 ,j4 ,ashley under the title1 ,the ,origin of ,property in ,land1 #ahia2 ,g4 ,von ,below1 ,beilage zur ,allgemeine ,zeitung3 ,das kurze ,leben einer vielgenannten ,theorie1 #aijc2 ,f4 ,seebohm1 ,the ,village ,community1 #ahhc4 ,cf4 ,whittaker1 ,ownership1 ,tenure1 and ,taxation of ,land1 #aiad1 ch4 ii2 ,cathrein1 ,das ,privatgrundeigenthum und seine ,gegner1 #aiji2 and ,pesch1 ,lehrbuch der ,nationaloekonomie1 ,i1 #ahc-ahh4 #c ,quoted in ,whittaker1 op4 cit41 pp4 #bg1 #bh4 #d ,idem1 p4 #bi4 #e ,cf4 ,p4 ,w4 ,joyce1 ,a ,social ,history of ,ancient ,ireland1 #aijc2 and ,letourneau1 ,property3 ,its ,origin and ,development1 #ahif4 #f ,whittaker1 op4 cit41 pp4 #cj1 #ca4 #g ,leviticus xxv1 #bc-bh4 ,,chapter ,,iii ,,the ,,arguments ,,against ,,private ,,landownership ,if land were not privately owned there would be no receiving of rent by individuals4 ,therefore1 the morality of the landlord's share of the national product is intimately related to1 and is usually treated in connection with1 the morality of private ownership4 ,substantially all the opponents of private property in land to-day are either ,socialists or disciples of ,henry ,george4 ,in the view of the former1 land as well as the other means of production should be owned and managed by the ,state4 ,although they are more numerous than the ,georgeites1 their attack upon private landownership is less conspicuous and less formidable than the propaganda carried on by the ,henry ,george men4 ,the ,socialists give most of their attention to the artificial instruments of production1 dealing with land only incidentally1 implicitly1 or occasionally4 ,the followers of ,henry ,george1 commonly known as ,single ,taxers or ,single ,tax men1 defend the private ownership of artificial capital1 or capital in the strict economic sense1 but desire that the control of the community over the natural means of production should be so far extended as to appropriate for public uses all economic rent4 ,their criticism of private ownership is not only more prominent than that made by the ,socialists1 but is based to a much greater extent upon ethical considerations4 ,arguments by ,socialists ,indeed1 the orthodox or ,marxian ,socialists are logically debarred by their social philosophy from passing a strictly moral judgment upon property in land4 ,for their theory of economic determinism1 or historical materialism1 involves the belief that private landownership1 like all other social institutions1 is a necessary product of economic forces and processes4 ,hence it is neither morally good nor morally bad4 ,since neither its existence nor its continuance depends upon the human will1 it is entirely devoid of moral quality4 ,it is as unmoral as the succession of the seasons1 or the movement of the tides4 ,and it will disappear through the inevitable processes of economic evolution4 ,as expressed by ,engels3 ,the growing perception that existing social institutions are unreasonable and unjust1 that reason has become unreason1 and right wrong1 is only proof that in the modes of production and exchange changes have taken place1 with which the social order1 adapted to earlier economic conditions1 is no longer in keeping4#h ,frequently1 however1 the individual ,socialist forgets this materialistic theory1 and falls back upon his common sense1 and his innate conceptions of right and wrong1 of free will and responsibility4 ,instead of regarding the existing land system as a mere product of blind economic forces1 he often denounces it as morally wrong and unjust4 ,his contentions may be reduced to two propositions3 ,the proprietor who takes rent from a cultivator robs the producer of a part of his product2 and no one has a right to take for his exclusive use that which is the natural heritage and means of support for all the people4 ,referring to the receipt of #ce1jjj1jjj pounds a year in rent by #h1jjj ,british landlords1 ,hyndman and ,morris exclaim3 ,yet in the face of all this a certain school still contend that there is no class robbery4#i ,since the claim that the labourer has a right to the full product of his labour applies to capital as well as to land1 it can be more conveniently considered when we come to treat of the income of the capitalist4 ,with regard to the second contention1 the following statement by ,robert ,blatchford may be taken as fairly representative of ,socialist thought3 ,the earth belongs to the people4444 ,so that he who possesses land possesses that to which he has no right1 and he who invests his savings in land becomes the purchaser of stolen property4#aj ,inasmuch as this argument is substantially the same as one of the fundamental contentions in the system of ,henry ,george1 it will be discussed in connection with the latter1 in the pages immediately following4 ,henry ,george's ,attack on the ,title of ,first ,occupancy ,every concrete right1 whether to land or to artificial goods1 is based upon some contingent fact or ground1 called a title4 ,by reason of some title a man is justified in appropriating a particular farm1 house1 or hat4 ,when he becomes the proprietor of a thing that has hitherto been ownerless1 his title is said to be original2 when he acquires an article from some previous owner1 his title is said to be derived4 ,as an endless series of proprietors is impossible1 every derived title must be traceable ultimately to some original title4 ,among the derived titles the most important are contract1 inheritance1 and prescription4 ,the original title is either first occupancy or labour4 ,the prevailing view among the defenders of private landownership has always been that the original title is not labour but first occupancy4 ,if this title be not valid every derived title is worthless1 and no man has a true right to the land that he calls his own4 ,henry ,george's attack upon the title of first occupancy is an important link in his argument against private property in land4 ,priority of occupation give exclusive and perpetual title to the surface of a globe in which1 in the order of nature1 countless generations succeed each other6444 ,has the first comer at a banquet the right to turn back all the chairs1 and claim that none of the other guests shall partake of the food provided1 except as they make terms with him8 ,does the first man who presents a ticket at the door of a theatre1 and passes in1 acquire by his priority the right to shut the doors and have the performance go on for him alone8444 ,and to this manifest absurdity does the recognition of the individual right to land come when carried to its ultimate that any human being1 could he concentrate in himself the individual rights to the land of any country1 could expel therefrom all the rest of the inhabitants2 and could he concentrate the individual rights to the whole surface of the globe1 he alone of all the teeming population of the earth would have the right to live4#aa ,in passing1 it may be observed that ,henry ,george was not the first distinguished writer to use the illustration drawn from the theatre4 ,cicero1 ,st4 ,basil1 and ,st4 ,thomas ,aquinas all employed it to refute extravagant conceptions of private ownership4 ,in reply to the foregoing argument of ,henry ,george1 we point out3 first1 that the right of ownership created by first occupancy is not unlimited1 either extensively or intensively2 and1 second1 that the historical injustices connected with private ownership have been in only a comparatively slight degree due to the first occupation of very large tracts of land4 ,the right of first occupancy does not involve the right to take a whole region or continent1 compelling all subsequent arrivals to become tenants of the first4 ,there seems to be no good reason to think that the first occupant is justified in claiming as his own more land than he can cultivate by his own labour1 or with the assistance of those who prefer to be his employs or his tenants rather than independent proprietors4 ,he has not the right to reserve for himself alone the whole territory1 but only that part of it which is really useful to him1 which he can make fruitful4#ab ,nor is the right of private landownership1 on whatever title it may rest1 unlimited intensively1 that is1 in its powers or comprehension4 ,though a man should have become the rightful owner of all the land in a neighbourhood1 he would have no moral right to exclude therefrom those persons who could not without extreme inconvenience find a living elsewhere4 ,he would be morally bound to let them cultivate it at a fair rental4 ,the ,christian conception of the intensive limitations of private ownership is well exemplified in the action of ,pope ,clement ,,iv1 who permitted strangers to occupy the third part of any estate which the proprietor refused to cultivate himself4#ac ,ownership understood as the right to do what one pleases with one's possessions1 is due partly to the ,roman law1 partly to the ,code ,napolon1 but chiefly to modern theories of individualism4 ,in the second place1 the abuses which have accompanied private property in land are very rarely traceable to abuses of the right of first occupancy4 ,the men who have possessed too much land1 and the men who have used their land as an instrument of social oppression1 have scarcely ever been first occupants or the successors thereof through derived titles4 ,this is especially true of modern abuses1 and modern legal titles4 ,in the words of ,herbert ,spencer3 ,violence1 fraud1 the prerogative of force1 the claims of superior cunning1--these are the sources to which these titles may be traced4 ,the original deeds were written with the sword1 rather than with the pen3 not lawyers but soldiers were the conveyancers3 blows were the current coin given in payment2 and for seals blood was used in preference to wax4#ad ,not the appropriation of land which nobody owned1 but the forcible and fraudulent seizure of land which had already been occupied1 has been one of the main causes of the evils attending upon private landownership4 ,moreover1 in ,england and all other countries that have adopted her legal system1 the title of first occupancy could never be utilised by individuals3 all unoccupied land was claimed by the ,crown or by the ,state1 and transferred thence to private persons or corporations4 ,if some individuals have got possession of too much land through this process1 the ,state1 not the title of first occupancy1 must bear the blame4 ,this is quite clear in the history of land tenure in the ,united ,states and ,australasia4 ,henry ,george's attack upon private landownership through the title of first occupancy is therefore ineffective2 for he attributes to this qualities that it does not possess1 and consequences for which it is not responsible4 ,his ,defence of the ,title of ,labour ,thinking that he has shattered the title of first occupancy1 ,henry ,george undertakes to set up in its place the title of labour4 ,there can be to the ownership of anything no rightful title which is not derived from the title of the producer1 and does not rest on the natural right of the man to himself4#ae ,the only original title is man's right to the exercise of his own faculties2 from this right follows his right to what he produces2 now man does not produce land2 therefore he cannot have rightful property in land4 ,of these four propositions the first is a pure assumption1 the second is untrue1 the third is a truism1 and the fourth is as unfounded as the first4 ,dependently upon ,god1 man has1 indeed1 a right to himself and to the exercise of his own faculties2 but this is a right of action1 not of property4 ,by the exercise of this right alone man can never produce anything1 never become the owner of anything4 ,he can produce only by exerting his powers upon something outside of himself2 that is1 upon the goods of external nature4 ,to become the producer and the owner of a product1 he must first become the owner of materials4 ,by what title is he to acquire these8 ,in one passage#af ,henry ,george seems to think that no title is necessary1 and refers to the raw material as an accident1 while the finished product is the essence1 declaring that the right of private ownership attaches the accident to the essence1 and gives the right of ownership to the natural material in which the labour of production is embodied4 ,now this solution of the difficulty is too simple and arbitrary4 ,its author would have shrunk from applying it universally2 for example1 to the case of the shoemaker who produces a pair of shoes out of stolen materials1 or the burglar who makes an overcoat more useful 7and therefore performs a task of production7 by transferring it from a warehouse to his shivering back6 ,evidently ,henry ,george has in mind only raw material in the strict sense1 that which has not yet been separated from the storehouse of nature2 for he declares in another place that the right to the produce of labour cannot be enjoyed without the free use of the opportunities offered by nature4#ag ,in other words1 man's title to the materials upon which he is to exercise his faculties1 and of which he is to become the owner by right of production1 is the title of gift conferred by nature1 or nature's ,god4 ,nevertheless this title is applicable only to those goods that exist in unlimited abundance1 not to those parts of the natural bounty that are scarce and possess economic value4 ,a general assumption by producers that they were entitled to take possession of the gifts of nature indiscriminately would mean industrial anarchy and civil war4 ,hence ,henry ,george tells us that the individual should pay rent to the community to satisfy the equal rights of all other members of the community4#ah ,inasmuch as the individual must pay this price before he begins to produce1 his right to the use of natural opportunities is not free1 nor does his labour alone constitute a title to that part of them that he utilises in production4 ,consequently labour does not create a right to the concrete product4 ,it merely gives the producer a right to the value that he adds to the raw material4 ,his right to the raw material itself1 to the elements that he withdraws from the common store1 and fashions into a product1 say1 wheat1 lumber1 or steel1 does not originate in the title of labour but in the title of contract4 ,this is the contract by which in exchange for rent paid to the community he is authorised to utilise these materials4 ,until he has made this contract he has manifestly no full right to the product into which natural forces as well as his own labour have entered4 ,according to ,henry ,george's own statements1 therefore1 the right to the product does not spring from labour alone1 but from labour plus compensation to the community4 ,since the contract by which the prospective user agrees to pay this compensation or rent must precede his application of labour1 it instead of labour is the original title4 ,since the contract is made with a particular community for the use of a particular piece of land1 the title that it conveys must derive ultimately from the occupation of that land by that community1--or some previous community of which the present one is the legal heir4 ,so far as economically valuable materials are concerned1 therefore1 the logic of ,henry ,george's principles leads inevitably to the conclusion that the original title of ownership is first occupancy4 ,even in the case of economically free goods1 the original title of ownership is occupancy4 ,henry ,george declares that the traveller who has filled his vessels at a free-for-all spring owns the water when he has carried it into a desert1 by the title of labour4#ai ,nevertheless1 in its original place this water belonged either to the community or to nobody4 ,in the former supposition it can become the property of the traveller only through an explicit or implicit gift from the community2 and it is this contract1 not labour1 that constitutes his title to the water4 ,if we assume that the spring was ownerless1 we see that the labour of carrying a portion of it into the desert still lacks the qualifications of a title2 for the abstracted water must have belonged to him before he began the journey4 ,it must have been his from the moment that he separated it from the spring4 ,otherwise he had no right to take it away4 ,his labour of transporting it gave him a right to the utility thus added to the water1 but not a right to the water when it first found a local habitation in his vessels4 ,nor was the labour of transferring it from the spring into his vessels the true title2 for labour alone cannot create a right to the material upon which it is exerted1 as we see in the case of stolen objects4 ,if it be contended that labour together with the natural right to use the ownerless goods of nature have all the elements of a valid title1 the assertion must be rejected as unprecise and inadequate4 ,the right to use ownerless goods is a general and abstract right that requires to become specific and concrete through some title4 ,in the case of water it is a right to water in general1 to some water1 but not a right to a definite portion of the water in this particular spring4 ,the required and sufficient title here is that of apprehension1 occupation1 the act of separating a portion from the natural reservoir4 ,therefore1 it is first occupancy as exemplified in mere seizure of an ownerless good1 not labour in the sense of productive activity1 nor labour in the sense of painful exertion1 that constitutes the precise title whereby the man acquires a right to the water that he has put into his cup or barrel4 ,mere seizure is a sufficient title in all such cases as that which we are now considering1 simply because it is a reasonable method of determining and specifying ownership4 ,there is no need whatever of having recourse to the concept of labour to justify this kind of property right4 ,in the present case1 indeed1 the acts of apprehension and of productive labour 7the labour of dipping the water into a vessel is productive inasmuch as the water is more useful there than in the spring7 are the same physically1 but they are distinct logically and ethically4 ,one is mere occupation1 while the other is production2 and ownership of a thing must precede1 in morals if not in time1 the expenditure upon it of productive labour4 ,the theory which bases the right of property on labour really depends in the ultimate resort on the right of possession and the fact that it is socially expedient1 and is therefore upheld by the laws of society4 ,grotius1 discussing this in the old ,roman days1 pointed out that since nothing can be made except out of pre-existing matter1 acquisition by means of labour depends1 ultimately1 on possession by means of occupation4#bj ,since man's right to his faculties does not of itself give him a right to exercise them upon material objects1 productive labour cannot of itself give him a right to the product therefrom created1 nor constitute the original title of ownership4 ,since labour is not the original title to property1 it is not the only possible title to property in land4 ,hence the fact that labour does not produce land1 has no bearing on the question of private landownership4 ,in passing it may be observed that ,henry ,george implicitly admitted that the argument from the labour title was not of itself sufficient to disprove the right of private property in land4 ,considering the objection1 if private property in land be not just1 then private property in the products of land is not just1 as the material of these products is taken from the land1 he replied that the latter form of ownership is in reality a mere right of temporary possession1 since the raw material in the products sooner or later returns to the reservoirs provided for all 444 and thus the ownership of them by one works no injury to others4#ba ,but private ownership of land1 he continued1 shuts out others from the very reservoirs4 ,here we have a complete abandonment of the principle which underlies the labour argument4 ,instead of trying to show from the nature of the situation that there is a logical difference between the two kinds of ownership1 he shifts his ground to a consideration of consequences4 ,he makes the title of social utility instead of the title of labour the distinguishing and decisive consideration4 ,as we shall see later1 he is wrong even on this ground2 for the fundamental justification of private landownership is precisely the fact that it is the system of land tenure most conducive to human welfare4 ,at present we merely call attention to the breakdown in his own hands of the labour argument4 ,to sum up the entire discussion on the original title of ownership3 ,henry ,george's attack upon first occupancy is futile because based upon an exaggerated conception of the scope of private landownership1 and upon a false assumption concerning the responsibility of that title for the historical evils of the system4 ,his attempt to substitute labour as the original title is likewise unsuccessful1 since labour can give a right only to the utility added to natural materials1 not to the materials themselves4 ,ownership of the latter reaches back finally to occupation4 ,whence it follows that the title to an artificial thing1 such as a hat or coat1 water taken from a spring1 a fish drawn from the sea1 is a joint or two-fold title2 namely1 occupation and labour4 ,where the product embodies scarce and economically valuable raw material1 occupation is usually prior to labour in time2 in all cases it is prior to labour logically and ethically4 ,since labour is not the original title1 its absence in the case of land does not leave that form of property unjustified4 ,the title of first occupancy remains4 ,in a word1 the one original title of all property1 natural and artificial1 is first occupancy4 ,the other arguments of ,henry ,george against private landownership are based upon the assumed right of all mankind to land and land values1 and on the contention that this right is violated by the present system of tenure4 ,the ,right of ,all ,men to the ,bounty of the ,earth ,the equal right of all men to the use of land is as clear as their equal right to breathe the air--it is a right proclaimed by the fact of their existence4 ,for we cannot suppose that some men have a right to be in the world1 and others no right4 ,if we are here by the equal permission of the ,creator1 we are all here with an equal title to the enjoyment of his bounty--with an equal right to the use of all that nature so impartially offers4444 ,there is in nature no such thing as a fee simple in land4 ,there is on earth no power which can rightfully make a grant of exclusive ownership of land4 ,if all existing men were to grant away their equal rights1 they could not grant away the rights of those who follow them4 ,for what are we but tenants for a day8 ,have we made the earth that we should determine the rights of those who after us shall tenant it in their turn8#bb ,the right to use the goods of nature for the support of life is certainly a fundamental natural right2 and it is substantially equal in all persons4 ,it arises1 on the one hand1 from man's intrinsic worth1 his essential needs1 and his final destiny2 and1 on the other hand1 from the fact that nature's bounty has been placed by ,god at the disposal of all ,his children indiscriminately4 ,but this is a general and abstract right4 ,what does it imply specifically and in the concrete8 ,in the first place1 it includes the actual and continuous use of some land2 for a man cannot support life unless he is permitted to occupy some portion of the earth for the purposes of working1 and eating1 and sleeping4 ,secondly1 it means that in time of extreme need1 and when more orderly methods are not available1 a man has the right to seize sufficient goods1 natural or produced1 public or private1 to support life4 ,so much is admitted and taught by all ,catholic authorities1 and probably by all other authorities4 ,furthermore1 the abstract right in question seems very clearly to include the concrete right to obtain on reasonable conditions at least the requisites of a decent livelihood2 for example1 by direct access to a piece of land1 or in return for a reasonable amount of useful labour4 ,all of these particular rights are equally valid in all persons4 ,does the equal right to use the bounty of nature include the right to equal shares of land1 or land values1 or land advantages8 ,since the resources of nature have been given to all men in general1 and since human nature is specifically and juridically equal in all1 have not all persons the right to share equally in these resources8 ,suppose that some philanthropist hands over to one hundred persons an uninhabited island1 on condition that they shall divide it among themselves with absolute justice4 ,are they not obliged to divide it equally8 ,on what ground can any person claim or be awarded a larger share than his fellows8 ,none is of greater intrinsic worth than another1 nor has any one made efforts1 or sacrifices1 or products which will entitle him to exceptional treatment4 ,the correct principle of distribution would seem to be absolute equality1 except in so far as it may be modified on account of varying needs1 and varying capacities for social service4 ,in any just distribution account must be taken of differences in needs and capacities2 for it is not just to treat men as equal in those respects in which they are unequal1 nor is it fair to deprive the community of those social benefits which can be obtained only by giving exceptional rewards for exceptional services4 ,the same amount of food allotted to two persons might leave one hungry and the other sated2 the same amount of land assigned to two persons might tempt the one to wastefulness and discourage the other4 ,to be sure1 the factor of exceptional capacity should not figure in the distribution until all persons had received that measure of natural goods which was in each case sufficient for a decent livelihood4 ,for the fundamental justification of any distribution is to be sought in human needs2 and among human needs the most deserving and the most urgent are those which must be satisfied as a prerequisite to right and reasonable life4 ,now it is true that private ownership of land has nowhere realised this principle of proportional equality and proportional justice4 ,no such result is possible in a system that1 in addition to other difficulties1 would be required to make a new distribution at every birth and at every death4 ,private ownership of land can never bring about ideal justice in distribution4 ,nevertheless it is not necessarily out of harmony with the demands of practical justice4 ,a community that lacks either the knowledge or the power to establish the ideal system is not guilty of actual injustice because of this failure4 ,in such a situation the proportionally equal rights of all men to the bounty of nature are not actual rights4 ,they are conditional1 or hypothetical1 or suspended4 ,at best they have no more moral validity than the right of a creditor to a loan that1 owing to the untimely death of the debtor1 he can never recover4 ,in both cases it is misleading to talk of injustice2 for this term always implies that some person or community is guilty of some action which could have been avoided4 ,the system of private landownership is not1 indeed1 perfect2 but this is not exceptional in a world where the ideal is never attained1 and all things are imperfect4 ,henry ,george declares that there is on earth no power which can rightfully make a grant of exclusive ownership in land2 but what would he have a community do which has never heard of his system8 ,introduce some crude form of communism1 or refrain from using the land at all1 and permit the people to starve to death in the interests of ideal justice8 ,evidently such a community must make grants of exclusive ownership1 and these will be as valid in reason and in morals as any other act that is subject to human limitations which are at the time irremovable4 ,perhaps the ,single ,taxer would admit the force of the foregoing argument4 ,he might insist that the titles given by the ,state in such conditions were not exclusive grants in the strict sense1 but were valid only until a better system could be set up1 and the people put in possession of their natural heritage4 ,let us suppose1 then1 that a nation were shown a more excellent way4 ,suppose that the people of the ,united ,states set about to establish ,henry ,george's system in the way that he himself advocated4 ,they would forthwith impose upon all land an annual tax equivalent to the annual rent4 ,what would be the effect upon private land-incomes1 and private land-wealth8 ,since the first would be handed over to the ,state in the form of a tax1 the second would utterly disappear4 ,for the value of land1 like the value of any other economic good1 depends upon the utilities that it embodies or produces4 ,whoever controls these will control the market value of the land itself4 ,no man will pay anything for a revenue-producing property if some one else1 for example1 the ,state1 is forever to take the revenue4 ,the owner of a piece of land which brings him an annual revenue or rent of one hundred dollars1 will not find a purchaser for it if the ,state appropriates the one hundred dollars in the form of a tax that is to be levied year after year for all time4 ,on the assumption that the revenue represents a selling value of two thousand dollars1 the private owner will be worth that much less after the introduction of the new system4 ,henry ,george defends this proceeding as emphatically just1 and denies the justice of compensating the private owners4 ,in the chapter of ,progress and ,poverty headed1 ,claim of ,land ,owners to ,compensation1 he declares that private property in land is a bold1 bare1 enormous wrong1 like that of chattel slavery2 and against ,mill's statement that land owners have a right to rent and to the selling value of their holdings1 he exclaims3 ,if the land of any country belong to the people of that country1 what right1 in morality and justice1 have the individuals called land owners to the rent8 ,if the land belong to the people1 why in the name of morality and justice should the people pay its salable value for their own8#bc ,here1 then1 we have the full implication of the ,georgean principle that private property in land is essentially unjust4 ,it is not merely imperfect1--tolerable while unavoidable4 ,when it can be supplanted by the right system1 its inequalities must not continue under another form4 ,if inequalities are continued through the compensation of private owners1 individuals are still hindered from enjoying their equal rights to land1 and the ,state becomes guilty of formal and culpable injustice4 ,the titles which the ,state formerly guaranteed to the private owners did not have in morals the perpetual validity which they professed to have4 ,since the ,state is not the owner of the land1 it was morally powerless to create or sanction titles of this character4 ,even if all the citizens at any given time had deliberately transferred the necessary authorisation to the ,state1 they could not1 in the words of ,henry ,george1 grant away the right of those who follow them4 ,the individual's right to land is innate and natural1 not civil or social4 ,the author of ,progress and ,poverty attributes to the individual's common right to land precisely the same absolute character that ,father ,liberatore predicates of the right to become a private land owner4#bd ,in the view of ,henry ,george1 the ,state is merely the trustee of the land1 having the duty of distributing its benefits and values so as to make effective the equal rights of all individuals4 ,consequently1 the legal titles of private ownership which it creates or sanctions are valid only so long as nothing better is available4 ,at best such titles have no greater moral force than the title by which an innocent purchaser holds a stolen watch2 and the persons who are thereby deprived of their proper shares of land benefits1 have the same right to recover them from the existing private owners that the watch-owner has to recover his property from the innocent purchaser4 ,hence the demand for compensation has no more merit in the one case than in the other4 ,to the objection that the civil laws of many civilised countries would permit the innocent purchaser of the watch to retain it1 provided that sufficient time had elapsed to create a title of prescription1 the ,single ,taxer would reply that the two kinds of goods are not on the same moral basis in all respects4 ,he would contend that the natural heritage of the race is too valuable1 and too important for human welfare to fall under the title of prescription4 ,to put the matter briefly1 then1 ,henry ,george contends that the individual's equal right to land is so much superior to the claim of the private owner that the latter must give way1 even when it represents an expenditure of money or other valuable goods4 ,the average opponent does not seem to realise the full force of the impression which this theory makes upon the man who overemphasises the innate rights of men to a share in the gifts of nature4 ,let us see whether this right has the absolute and overpowering value which is attributed to it by ,henry ,george4 ,in considering this question1 the supremely important fact to be kept in mind is that the natural right to land is not an end in itself4 ,it is not a prerogative that inheres in men1 regardless of its purposes or effects4 ,it has validity only in so far as it promotes individual and social welfare4 ,as regards individual welfare1 we must bear in mind that this phrase includes the well being of all persons1 of those who do as well as of those who do not at present enjoy the benefits of private landownership4 ,consequently the proposal to restore to the disinherited the use of their land rights must be judged by its effects upon the welfare of all persons4 ,if existing landowners are not compensated they are deprived1 in varying amounts1 of the conditions of material well being to which they have become accustomed1 and are thereby subjected to varying degrees of positive inconvenience and hardship4 ,the assertion that this loss would be offset by the moral gain in altruistic feelings and consciousness1 may be passed over as applying to a different race of beings from those who would be despoiled4 ,the hardship is aggravated considerably by the fact that very many of the dispossessed private owners have paid the full value of their land out of the earnings of labour or capital1 and that all of them have been encouraged by society and the ,state to regard landed property in precisely the same way as any other kind of property4 ,in the latter respect they are not in the same position as the innocent purchaser of the stolen watch2 for they have never been warned by society that the land might have been virtually stolen1 or that the supposedly rightful claimants might some day be empowered by the law to recover possession4 ,on the other hand1 the persons who own no land under the present system1 the persons who are deprived of their birthright1 suffer no such degree of hardship when they are continued in that condition4 ,they are kept out of something which they have never possessed1 which they have never hoped to get by any such easy method1 and from which they have not been accustomed to derive any benefit4 ,to prolong this condition is not to inflict upon them any new or positive inconvenience4 ,evidently their welfare and claims in the circumstances are not of the same moral importance as the welfare and claims of persons who would be called upon to suffer the loss of goods already possessed and enjoyed1 and acquired with the full sanction of society4 ,henry ,george is fond of comparing the private owner of land with the slave owner1 and the landless man with the man enslaved2 but there is a world of difference between their respective positions and moral claims4 ,liberty is immeasurably more important than land1 and the hardship suffered by the master when he is compelled to free the slave is immeasurably less than that endured by the slave who is forcibly detained in bondage4 ,moreover1 the moral sense of mankind recognises that it is in accordance with equity to compensate slave owners when the slaves are legally emancipated4 ,infinitely stronger is the claim of the landowner to compensation4 ,if the ,georgeite replies that the landless man is at present kept out of something to which he has a right1 while confiscation would take from the private owner something which does not really belong to him1 the rejoinder must be that this assertion begs the question4 ,the question is likewise begged when the unreasonable defender of private property declares that the right of the landless is vague and undetermined1 and therefore morally inferior to the determinate and specific right of the individual landowner4 ,this is precisely the question to be solved4 ,does the abstract right of the landless man become a concrete right which is so strong as to justify confiscation8 ,is his natural right valid against the acquired right of the private proprietor8 ,these questions can be answered intelligently only by applying the test of human welfare1 individual and social4 ,to say that land of its very nature is not morally susceptible of private ownership1 is to make an easy assertion that may be as easily denied4 ,to interpret man's natural right to land by any other standard than human welfare1 is to make of it a fetish1 not a thing of reason4 ,henry ,george himself seemed to recognise this when he wrote that wonderfully eloquent but overdrawn and one-sided description of the effects of private ownership which occurs in the chapter entitled1 ,claim of ,landowners to ,compensation4#be ,when we say that human welfare is the final determinant of the right to land1 we understand this phrase in the widest possible sense4 ,to divide the goods of the idle rich among the deserving poor1 might be temporarily beneficial to both these classes1 but the more remote and enduring consequences would be individually and socially disastrous4 ,to restore a legacy to persons who had been defrauded of it when very young1 would probably cause more hardship to the swindler than the heirs would have suffered had there been no restitution2 nevertheless the larger view of human welfare requires that the legacy should be restored4 ,when1 however1 two or three generations have been kept out of their inheritance1 the civil law permits the children of the swindler to retain the property by the title of prescription2 and for precisely the same reason1 human welfare4 ,the social consequences of the confiscation of rent and land values1 would be even more injurious than those falling upon the individuals despoiled4 ,social peace and order would be gravely disturbed by the protests and opposition of the landowners1 while the popular conception of property rights1 and of the inviolability of property1 would be greatly weakened1 if not entirely destroyed4 ,the average man would not grasp or seriously consider the ,georgean distinction between land and other kinds of property in this connection4 ,he would infer that purchase1 or inheritance1 or bequest1 or any other title having the immemorial sanction of the ,state1 does not create a moral right to movable goods any more than to land4 ,this would be especially likely in the matter of capital4 ,why should the capitalist1 who is no more a worker than the landowner1 be permitted to extract revenue from his possessions8 ,in both cases the most significant and practical feature is that one class of men contributes to another class an annual payment for the use of socially necessary productive goods4 ,if rent-confiscation would benefit a large number of people1 why not increase the number by confiscating interest8 ,indeed1 the proposal to confiscate rent is so abhorrent to the moral sense of the average man that it could never take place except in conditions of revolution and anarchy4 ,if that day should ever arrive the policy of confiscation would not stop with land4 ,the ,alleged ,right of the ,community to ,land ,values ,in the foregoing pages we have confined our attention to the ,georgean principle which bases men's common right to land and rent upon their common nature1 and their common claims to the material gifts of the ,creator4 ,another argument against private ownership takes this form3 ,consider what rent is4 ,it does not arise spontaneously from the soil2 it is due to nothing that the landowners have done4 ,it represents a value created by the whole community4444 ,but rent1 the creation of the whole community1 necessarily belongs to the whole community4#bf ,before taking up the main contention in this passage1 let us notice two incidental points4 ,if all rent be due to the community by the title of social production1 why does ,henry ,george defend at such length the title of birthright8 ,if the latter title does not extend to rent it is restricted to land which is so plentiful as to yield no rent4 ,since the owners or holders of such land rarely take the trouble to exclude any one from it1 the right in question1 the inborn right1 has not much practical value4 ,probably1 however1 the words quoted above ought not to be interpreted as excluding the title of birthright4 ,in that case1 the meaning would be that rent belongs to the community by the title of production1 as well as by the congenital title4 ,the second preliminary consideration is that the community does not create all land values nor all rent4 ,these things are as certainly due to nature as to social action4 ,in no case can they be attributed exclusively to one factor4 ,land that has no natural qualities or capacities suitable for the satisfaction of human wants will never have value or yield rent1 no matter what society does in connection with it3 the richest land in the world will likewise remain valueless1 until it is brought into relation with society1 with at least two human beings4 ,if ,henry ,george merely means to say that1 without the presence of the community1 land will not produce rent1 he is stating something that is perfectly obvious1 but it is not peculiar to land4 ,manufactured products would have no value outside of society1 yet no one maintains that their value is all created by social action4 ,although the value of land is always due to both nature and society1 for practical purposes we may correctly attribute the value of a particular piece of land predominantly to nature1 or predominantly to society4 ,when three tracts1 equally distant from a city1 and equally affected by society and its activities1 have different values because one is fit only for grazing1 while the second produces large crops of wheat1 and the third contains a rich coal mine1 their relative values are evidently due to nature rather than to society4 ,on the other hand1 the varying values of two equally fertile pieces of land unequally distant from a city1 must be ascribed primarily to social action4 ,in general1 it is probably safe to say that almost all the value of land in cities1 and the greater part of the value of land in thickly settled districts1 is specifically due to social action rather than to differences in fertility4 ,nevertheless1 it remains true that the value of every piece of land arises partly from nature1 and partly from society2 but it is impossible to say in what proportion4 ,our present concern is with those values and rents which are to be attributed to social action4 ,these cannot be claimed by any person1 nor by any community1 in virtue of the individual's natural right to the bounty of nature4 ,since they are not included among the ready made gifts of ,god1 they are no part of man's birthright4 ,if they belong to all the people the title to them must be sought in some historical fact1 some fact of experience1 some social fact4 ,according to ,henry ,george1 the required title is found in the fact of production4 ,socially created land values and rents belong to the community because the community1 not the private proprietor1 has produced them4 ,let us see in what sense the community produces the social value of land4 ,in the first place1 this value is produced by the community in two different senses of the word community1 namely1 as a civil1 corporate entity1 and as a group of individuals who do not form a moral unit4 ,under the first head must be placed a great deal of the value of land in cities2 for example1 that which arises from municipal institutions and improvements1 such as1 fire and police protection1 water works1 sewers1 paved streets1 and parks4 ,on the other hand1 a considerable part of land values both within and without cities is due1 not to the community as a civil body1 but to the community as a collection of individuals and groups of individuals4 ,thus1 the erection and maintenance of buildings1 the various economic exchanges of goods and labour1 the superior opportunities for social intercourse and amusement which characterise a city1 make the land of the city and its environs more valuable than land at a distance4 ,while the activities involved in these economic and social facts and relations are1 indeed1 a social not an individual product1 they are the product of small1 temporary1 and shifting groups within the community4 ,they are not the activities of the community as a moral whole4 ,for example1 the maintenance of a grocery business implies a series of social relations and agreements between the grocer and his customers2 but none of these transactions is participated in by the community acting as a community4 ,consequently such actions and relations1 and the land values to which they give rise are not due to1 are not the products of the community as a unit1 as a moral body1 as an organic entity4 ,what is true of the land values created by the grocery business applies to the values which are due to other economic institutions and relations1 as well as to those values which arise out of the purely social activities and advantages4 ,if these values are to go to their producers they must be taken1 in various proportions1 by the different small groups and the various individuals whose actions and transactions have been directly responsible4 ,to distribute these values among the producers thereof in proportion to the productive contribution of each person is obviously impossible4 ,how can it be known1 for example1 what portion of the increase in the value of a city's real estate during a given year is due to the merchants1 the manufacturers1 the railroads1 the labourers1 the professional classes1 or the city as a corporation8 ,the only practical method is for the city or other political unit to act as the representative of all its members1 appropriate the increase in value1 and distribute it among the citizens in the form of public services1 institutions1 and improvements4 ,assuming that the socially produced value of land ought to go to its social producer rather than to the individual proprietor1 this method of public appropriation and disbursement would seem to be the nearest approximation to practical justice that is available4 ,is the assumption correct8 ,do the socially produced land values necessarily belong to the producer1 society8 ,does not the assumption rest upon a misconception of the moral validity of production as a canon of distribution8 ,let us examine some of the ways in which values are produced4 ,the man who converts leather and other suitable raw materials into a pair of shoes1 increases the utility of these materials1 and in normal market conditions increases their value4 ,in a certain sense he has created value1 and he is universally acknowledged to have a right to this product4 ,similarly the man who increases the utility and value of land by fertilising1 irrigating1 or draining it1 is conceded the benefit of these improvements by the title of production4 ,but value may be increased by mere restriction of supply1 and by mere increase in demand4 ,if a group of men get control of the existing supply of wheat or cotton1 they can artificially raise the price1 thereby producing value as effectively as the shoemaker or the farmer4 ,if a syndicate of speculators gets possession of all the land of a certain quality in a community1 they can likewise increase its value1 produce new value4 ,if a few powerful leaders of fashion decide to adopt a certain style of millinery1 their action and example will effect an increase in the demand for and the value of that kind of goods4 ,yet none of these producers of value are regarded as having a moral right to their product4 ,when we turn to what is called the social creation of land values1 we find that it takes two forms4 ,it always implies increase of social demand2 but the latter may be either purely subjective1 reflecting merely the desires and power of the demanders themselves1 or it may have an objective basis connected with the land4 ,in the first case it may be due solely to an increase of population4 ,within the last few years1 agricultural land which is no more fertile nor any better situated with regard to markets or other social advantages than it was thirty years ago1 has risen in value because its products have risen in value4 ,its products have become dearer because population1 and therefore demand1 have grown faster than agricultural production4 ,merely by increasing its wants the population has produced land values2 but it has obviously no more right to them than have the leaders of fashion to the enhanced value which they have given to feminine headgear4 ,on the other hand1 the increased demand for land1 and the consequent increase in its value1 are frequently attributable specifically to changes connected with the land itself4 ,they are changes which affect its utility rather than its scarcity4 ,the farmer who irrigates desert land increases its utility1 as it were1 intrinsically4 ,the community that establishes a city increases the utility of the land therein and thereabout extrinsically4 ,new relations are introduced between that land and certain desirable social institutions4 ,land that was formerly useful only for agriculture becomes profitable for a factory or a store4 ,through its new external relations1 the land acquires new utility2 or better1 its latent and potential uses have become actual4 ,now these new relations1 these utility-creating and value-creating relations1 have been established by society1 in its corporate capacity through civil institutions and activities1 and in its non-corporate capacity through the economic and social 7in the narrower society sense7 activities of groups and individuals4 ,in this sense1 then1 the community has created the increased land values4 ,has it a strict right to them8 a right so rigorous and exact that private appropriation of them is unjust8 ,as we have just seen1 men do not admit that mere production of value constitutes a title of ownership4 ,neither the monopolist who increases value by restricting supply1 nor the pace-makers of fashion1 who increase value by merely increasing demand1 are regarded as possessing a moral right to the value that they have created4 ,it is increase of utility1 and not either actual or virtual increase of scarcity to which men attribute a moral claim4 ,why do men assign these different ethical qualities to the production of value8 ,why has the shoemaker a right to the value that he adds to the raw material in making a pair of shoes8 ,what is the precise basis of his right8 ,it cannot be labour merely2 for the cotton monopolist has laboured in getting his corner on cotton4 ,it cannot be the fact that the shoemaker's labour is socially useful2 for a chemist might spend laborious days and nights producing water from its component elements1 and find his product a drug on the market4 ,yet he would have no reasonable ground of complaint4 ,why1 then1 is it reasonable for the shoemaker to require1 why has he a right to require payment for the utilities that he produces8 ,because men want to use his products1 and because they have no right to require him to serve them without compensation4 ,he is morally and juridically their equal1 and has the same right as they to have access on reasonable terms to the earth and the earth's possibilities of a livelihood4 ,being thus equal to his fellows1 he is under no obligation to subordinate himself to them by becoming a mere instrument for their welfare4 ,to assume that he is obliged to produce socially useful things without remuneration1 is to assume that all these propositions are false2 it is to assume that his life and personality and personal development are of no intrinsic importance1 and that his pursuit of the essential ends of life has no meaning except in so far as may be conducive to his function as an instrument of production4 ,in a word1 the ultimate basis of the producer's right to his product1 or its value1 is the fact that this is the only way in which he can get his just share of the earth's goods1 and of the means of life and personal development4 ,his right to compensation does not rest on the mere fact of value-production4 ,as a producer of land values1 the community is not on the same moral ground with the shoemaker4 ,its productive action is indirect and extrinsic1 instead of direct and intrinsic1 and is merely incidental to its principal activities and purposes4 ,land values are a by-product which do not require the community to devote thereto a single moment of time or a single ounce of effort4 ,the activities of which land values are a by-product1 have already been remunerated in the price paid to the wage-earner for his labour1 the physician for his services1 the manufacturer and the merchant for their wares1 and the municipal corporation in the form of taxes4 ,on what ground can the community1 or any part of it1 set up a claim in strict justice to the increased land values8 ,the right of the members of the community to the means of living and self development is not dependent upon the taking of these values by the community4 ,nor are they treated as instruments to the welfare of the private owners who do get the socially created land values2 for they expend neither time nor labour in the interest of the latter directly4 ,their labour is precisely what it would have been had there been no increase in the value of the land4 ,since social production does not constitute a right to land values nor to rent1 it affords not a shadow of justification for the confiscation of these things by the community4 ,if social appropriation of socially created land values had been introduced with the first occupation of a piece of land1 it might possibly have proved more generally beneficial than the present system4 ,in that case1 however1 the moral claim of the community to these values would have rested on the fact that they did not belong to anybody by a title of strict justice4 ,they would have been a res nullius 7nobody's property7 which might fairly have been taken by the community according as they made their appearance4 ,the community could have appropriated them by the title of first occupancy4 ,but there could have been no moral title of social production4 ,when1 however1 the community or the ,state failed to take advantage of its opportunity to be the first occupant of these values1 when it permitted the individual proprietor to appropriate them1 it forfeited its own claim4 ,ever since it has had no more right to already existing land values than it has to seize the labourer's wages or the capitalist's interest1--no more right than one person has to recover a gift or donation that he has unconditionally bestowed upon another4 ,to sum up the conclusions of this chapter3 ,the argument against first occupancy is valid only with regard to the abuses of private ownership1 not with regard to the institution2 the argument based upon the title of labour is the outcome of a faulty analysis1 and is inconsistent with other statements of its author2 the argument derived from men's equal rights to land merely proves that private ownership does not secure perfect justice1 and the proposal to correct this defect by confiscating rent is unjust because it would produce greater evils2 and the so called production of the social values of land confers upon the community no property right whatever4 ,,footnotes3 #h ,socialism3 ,utopian and ,scientific1 p4 #de2 ,chicago1 #aijj4 #i ,a summary of the ,principles of ,socialism1 p4 #bc2 ,london1 #ahii4 #aj ,socialism3 ,a ,reply to the ,pope's ,encyclical1 p4 #d2 ,london1 #ahii4 #aa ,progress and ,poverty1 book vii1 ch4 i4 #ab ,la ,proprit ,prive1 par ,l4 ,garriguet1 ,i1 #fb2 ,paris1 #aijc4 #ac ,cf4 ,ardant1 ,papes et ,paysans1 pp4 #da1 sq4 #ad ,social ,statics1 chap1 ix2 #ahej4 ,spencer's retractation1 in a later edition of this work1 of his earlier views on the right of property in land does not affect the truth of the description quoted in the passage above4 #ae ,progress and ,poverty1 loc4 cit4 #af ,open ,letter to ,pope ,leo ,,xiii1 page #be of ,vierth's edition4 #ag ,progress and ,poverty1 loc4 cit4 #ah ,progress and ,poverty1 loc4 cit4 #ai ,open ,letter to ,pope ,leo ,,xiii1 loc4 cit4 #bj ,whittaker1 op4 cit41 p4 #cb4 #ba ,open ,letter1 loc4 cit4 #bb ,progress and ,poverty1 book vii1 ch4 i4 #bc ,cf4 chapter entitled ,compensation in ,a ,perplexed ,philosopher4 #bd ,cf4 ,principles of ,political ,economy1 #ahia1 p4 #acj4 #be ,progress and ,poverty4 #bf ,progress and ,poverty1 book vii1 ch4 iii4 ,,chapter ,,iv ,,private ,,ownership ,,the ,,best ,,system ,,of ,,land ,,tenure ,the defence of private landownership set forth in the last chapter has been conditional4 ,it has tended to show that the institution is morally lawful so long as no better system is available4 ,as soon as a better system has been discovered1 the ,state and the citizens are undoubtedly under some degree of moral obligation to put it into practice4 ,hence the important present question is whether this condition or contingency has become a reality4 ,the only proposed and the only possible alternative systems are ,socialism and the ,single ,tax4 ,all other forms of tenure are properly classed as modifications of private ownership1 rather than as distinct systems4 ,consequently the worth1 and efficiency1 and morality of private ownership can be adequately determined by comparison with the two just mentioned4 ,the ,socialist ,proposals ,impracticable ,as now existing and as commonly understood1 private landownership comprises four elements which are not found together in either ,socialism or the ,single ,tax4 ,they are3 security of possession combined with the power to transfer and transmit2 the use of land combined with the power to let the use to others2 the receipt of revenue from improvements in or upon the land2 and the receipt of economic rent1 the revenue due to the land itself1 apart from improvements4 ,in its extreme form1 and as formerly understood by the majority of its authoritative exponents1 ,socialism would take from the individual all of these elements or powers4 ,the ,state1 or the ,collectivity1 would own and manage all productive land and land-capital1 and would receive and distribute the product4 ,consequently the cultivators of the land would be deprived of even that limited degree of control which is now possessed by the tenant on a rented farm2 for the latter1 though not a landowner1 is the owner of a farming business1 and of agricultural instruments of production4 ,under ,socialism the users of the land would not receive the revenue either from improvements or from the land itself4 ,they would be substantially employs of the community1 receiving a share of the product according to some plan of distribution established by public authority4 ,land occupied by dwellings would likewise be owned and managed by the ,state1 although its product1 the benefit of its use1 would necessarily go in the first instance to the occupier4 ,in return for this benefit he would undoubtedly be required to pay some kind of rent to the ,state4 ,now the majority of persons believe that this system of land tenure would be inferior to private ownership1 both as regards individual welfare and social welfare4 ,the reasons for this belief will be given in detail in the chapter on ,the ,socialist ,scheme of ,industry4 ,for the present it will be sufficient to point out in a summary way that ,socialism would be unable to organise and carry on efficiently all agricultural and extractive industries1 either under one central direction or under many provincial authorities2 that it could not adjust wages and salaries satisfactorily1 nor give the individual worker an incentive as effective as the self interest that goes with private ownership2 that it would deprive the worker of a great part of the freedom that he now enjoys in the matters of occupation and residence2 that it would leave to the consumer less choice in the demand for the products of land2 that it would place all the people in a position of dependence upon a single agency for all these products2 and that it would make all land users1 whether as workers or as residents1 tenants-at-will on the property of the ,state4 ,from the nature of the case1 none of the foregoing propositions can be demonstrated mathematically4 ,nevertheless they are as nearly evident as any other practical conclusions which are based upon our general experience of human nature1 its tendencies1 and its limitations4 ,at any rate1 the burden of proof is upon the advocates of the new system4 ,until they have assumed and satisfactorily disposed of this burden1 we are justified in rejecting their prophecies1 and in maintaining the superiority of private ownership4#bg ,to-day1 however1 many ,socialists1 possibly the majority of them in some countries1 would reject the extreme form of land socialisation discussed in the preceding paragraphs4 ,the nearest approach which ,socialists have made to a volte face since ,marx1 has been in relation to ,agrarianism4444 ,marx thought that the advantage of concentrating capital would be felt in agriculture as in other industries2 but1 in spite of a temporary confirmation of this view by the mammoth farms which sprang up in ,north ,america1 it now appears very doubtful4444 ,recognition of this has led reformists to substitute a policy of actively assisting the peasants for the orthodox policy of leaving them to succumb to capitalism4 ,their formula is3 ',collectivise credit1 transport1 exchange1 and all subsidiary manufacture1 but individualise culture4'#bh ,the ,belgian ,socialist leader1 ,vandervelde1 seems to prefer ,state ownership and management of the great agricultural industries which require large masses of capital for their efficient operation1 such as dairying1 distilling1 and sugar making1 together with ,state ownership of the land thus used4 ,other lands he would have owned by the ,state1 but cultivated by individuals according to a system of leasing and rent-paying4#bi ,by a referendum vote the members of the ,socialist party in the ,united ,states recently amended their platform on land1 to read as follows3 ,the ,socialist party strives to prevent land from being used for the purpose of exploitation and speculation4 ,it demands the collective possession1 control or management of land to whatever extent may be necessary to attain that end4 ,it is not opposed to the occupation and possession of land by those using it in a useful and bona fide manner without exploitation4#cj ,as to land occupied by dwellings1 perhaps the majority of ,socialists would now agree with ,spargo in the statement that1 so far as the central principle of ,socialism is concerned1 there is no more reason for denying the right of a man to own his own home than there is to deny him the right to own his hat4#ca ,in so far as the foregoing modifications of ,socialist proposals would allow the individual to own the land that he cultivates or occupies1 they do not call for further discussion here4 ,in so far as they combine ,state ownership of land with individual management of cultivation1 they are subject to at least all the limitations of the ,single ,tax4 ,to the latter system we now turn our attention4 ,inferiority of the ,single ,tax ,system ,of the four leading elements of private ownership enumerated above1 the ,single ,tax scheme would comprise all but one4 ,in the words of ,henry ,george himself3 ,let the individuals who now hold it still retain1 if they want to1 possession of what they are pleased to call their land4 ,let them continue to call it their land4 ,let them buy and sell1 and bequeath and devise it4 ,we may safely leave them the shell1 if we take the kernel4 ,it is not necessary to confiscate land2 it is only necessary to confiscate rent4444 ,in this way the ,state may become the universal landlord without calling herself so1 and without assuming a single new function4 ,in form1 the ownership of land would remain just as now4 ,no owner of land need be dispossessed1 and no restriction need be placed upon the amount of land that any one could hold4#cb ,individuals would1 therefore1 still enjoy security of possession1 the managerial use of land1 and the revenue due to improvements4 ,the income arising from the land itself1 the economic rent1 they would be obliged to hand over as a free gift to the ,state4 ,as we have seen in a preceding chapter1 this confiscation of rent by the ,state would be pure and simple robbery of the private owner4 ,suppose1 however1 that the ,state were willing to compensate individual proprietors with a sum equal to the present value1 or the capitalised rent1 of their land4 ,in that case the only difference made to the individual would be that he could no longer invest his money in land nor profit by the increases in land values4 ,while this would deprive some persons of advantages that they now enjoy1 it would be beneficial to the majority1 and to the community4 ,since no man would find it profitable to retain control of more land than he could use himself1 the number of actual land users would be increased4 ,the land speculator would disappear1 together with the opportunity of making and losing fortunes by gambling on the changes in land values4 ,owing to the removal of taxation from the necessaries of life and from industry1 consumers would get goods cheaper1 and some stimulus would be given to production and employment4 ,those monopolies which derive their strength from land would become weaker and tend to disappear4 ,sooner or later there would probably be a considerable increase in the amount of money available for public improvements and socially beneficial institutions4 ,on the other hand1 there would be certain and serious disadvantages4 ,a considerable number of land users might permit their holdings to deteriorate through careless cultivation4 ,to be sure1 they would not find this a profitable course if they intended to remain on the land permanently2 but they might prefer to exhaust the best qualities of a farm in a few years1 and then retire1 or go into some other business1 or repeat the wearing-out process on other lands4 ,thus the community would suffer through the lowered productiveness of its land1 and because of the lower rent that it would receive from all subsequent users of the deteriorated tracts4 ,in the second place1 the administrative machinery required to levy and collect the rent1 and to apportion the different holdings among competitive bidders1 would inevitably involve a vast amount of error1 inequality1 favouritism1 and corruption4 ,for the land tax to be levied and collected would not be1 as now1 a fraction of the rental value1 but the full amount of the annual rent4 ,in the third place1 cultivators would not have the inducement to make improvements which arises from the hope of selling both the improvements and the land at a profit1 owing to the increased demand for the land4 ,perhaps the greatest disadvantage of the system would be the instability of tenure1 with regard to both productive and residential lands4 ,owing to misfortunes of various kinds1 for example1 one or two bad crops1 many cultivators would be temporarily unable to pay the full amount of the land tax or rent4 ,it is scarcely conceivable that the ,state would remit the deficiency1 or refuse to turn the land over to other persons on terms more advantageous to itself4 ,inasmuch as the value and rent of land would be continuously adjusted by competition1 the more efficient and more wealthy would frequently supplant the less efficient and the less wealthy1 even though the latter had occupied their holdings or their dwellings for a great number of years4 ,legal security of tenure1 though theoretically the same as that enjoyed by the private owner to-day1 would be much less effective practically4 ,in this respect land users would be in almost as bad a case as renters are at present4#cc ,our conclusion1 then1 is that private landownership is certainly better than extreme ,socialism1 or any form of ,socialism which does not concede to the land user all the control that he would have under the ,single ,tax system1 and that it is very probably superior to the latter4 ,in making this comparison and drawing this conclusion1 we have in mind private ownership1 not at its worst nor as it exists or has existed in any particular country1 but private ownership in its essential elements1 and with its capacity for modification and improvement4 ,if we were to examine carefully the results of private ownership as it obtained in ,ireland for several centuries before the enactment of the recent ,land ,purchase ,act1 we should probably be tempted to declare that the most extreme form of agrarian ,socialism could scarcely have been productive of more individual and social injury4 ,certain other countries present almost equally unfavourable conditions of comparison4 ,failure to note this distinction between the historical and the potential aspects of private landownership has vitiated many otherwise excellent defences of the institution4 ,it has provoked the retort that almost any plausible change would be an improvement upon private ownership as it has existed in this or that country4 ,but these are not the real alternatives4 ,the practical choice is between private ownership as shown by experience and reason to be capable of improvement1 and some untried system which is subject to grave defects1 and which at its best would be probably inferior to modified private ownership4 ,an attempt to describe some of these modifications and improvements will be made in a subsequent chapter4 ,in the meantime we content ourselves with the statement that private land ownership is capable of becoming better than ,socialism certainly1 and probably better than the ,single ,tax system4 ,consequently it is justified not merely so long as neither of these schemes is introduced1 but as an institution which the ,state would do well to maintain1 protect1 and improve4 ,,footnotes3 #bg ,cf4 ,chapter xi4 #bh ,ensor1 ,modern ,socialism1 p4 xxxi1 ,n4 ,y41 #aijd4 #bi ,idem1 pp4 #bac-baf4 #cj ,cited by ,spargo1 ,the ,substance of ,socialism1 p4 #hh1 ,n4 ,y41 #aiji4 #ca ,idem1 p4 #ij4 #cb ,progress and ,poverty1 book viii1 ch4 ii4 #cc ,cf4 ,walker1 ,land and ,its ,rent2 and ,seligman1 ,essays in ,taxation4 ,,chapter ,v ,,private ,,landownership ,a ,,natural ,,right ,the conclusions of the preceding chapter include the statement that individuals are morally justified in becoming and remaining landowners4 ,may we take a further step1 and assert that private landownership is a natural right of the individual8 ,if it is1 the abolition of it by the ,state1 even with compensation to the owners1 would be an act of injustice4 ,the doctrine of natural rights is so prominent in the arguments of both the advocates and the opponents of private landownership that it deserves specific treatment4 ,moreover1 the claim that private landownership is a natural right rests upon precisely the same basis as the similar claim with regard to the individual ownership of capital2 and the conclusions pertinent to the former will be equally applicable to the latter4 ,a natural right is a right derived from the nature of the individual1 and existing for his welfare4 ,hence it differs from a civil right1 which is derived from society or the ,state1 and is intended for a social or civil purpose4 ,such1 for example1 is the right to vote1 or the right to hold a public office4 ,since a natural right neither proceeds from nor is primarily designed for a civil end1 it cannot be annulled1 and it may not be ignored1 by the ,state4 ,for example3 the right to life and the right to liberty are so sacred to the individual1 so necessary to his welfare1 that the ,state cannot rightfully kill an innocent man1 nor punish him by a term in prison4 ,three ,principal ,kinds of ,natural ,rights ,although natural rights are all equally valid1 they differ in regard to their basis1 and their urgency or importance4 ,from this point of view1 we may profitably distinguish three principal types4 ,the first is exemplified in the right to live4 ,the object of this right1 life itself1 is intrinsically good1 good for its own sake1 an end in itself4 ,it is the end to which even civil society is a means4 ,since life is good intrinsically1 the right to life is also valid intrinsically1 and not because of consequences4 ,since there is no conceivable equivalent for life in the case of any individual in any contingency1 the right to life is immediate and direct in all possible circumstances4 ,among the natural rights of the second class1 the most prominent are the right to marry1 to enjoy personal freedom1 and to own consumption-goods1 such as food and clothing4 ,the objects of these rights are not ends in themselves1 but means to human welfare4 ,confining our attention to marriage1 we see that membership in the conjugal union is an indispensable means to reasonable life and self development in the majority of persons4 ,the only conceivable substitutes are free love and celibacy4 ,of these the first is inadequate for any person1 and the second is adequate only for a minority4 ,marriage is1 therefore1 directly and per se necessary for the majority of individuals2 for the majority it is an individual necessity4 ,if the ,state were to abolish marriage it would deprive the majority of an indispensable means of right and reasonable life4 ,consequently the majority have a direct natural right to the legal power of marrying4 ,in the case of the minority who do not need to marry1 who can live as well or better as celibates1 the legal opportunity of marriage is evidently not directly necessary4 ,but it is necessary indirectly1 inasmuch as the power of choice between marriage and celibacy is an individual necessity4 ,no argument is required to show that the ,state could not decide this matter consistently with individual welfare or social peace4 ,whence it follows that even the minority who do not wish or do not need to marry1 have a natural right to embrace or reject the conjugal condition4 ,in their case the right to marry is indirect1 but none the less inviolable4#cd ,private ownership of land belongs in a third class of natural rights4 ,inasmuch as it is not an intrinsic good1 but merely a means to human welfare1 it differs from life and resembles marriage4 ,on the other hand1 it is unlike marriage in that it is not directly necessary for any individual whatever4#ce ,the alternative to marriage1 namely1 celibacy1 would not even under the best social administration enable the majority to lead right and reasonable lives4 ,the alternative to private landownership 7and to private ownership of capital as well71 namely1 some form of employment as wage receiver1 salary receiver1 or fee receiver enables the individual to attain all the vital ends of private ownership3 food1 clothing1 shelter1 security of livelihood and residence1 and the means of mental1 moral1 and spiritual development4 ,none of these vital ends or needs is essentially dependent upon private ownership of land2 for millions of persons satisfy them every day without becoming landowners4 ,nor are they exceptions1 as those who can get along without marriage are exceptions4 ,the persons who live reasonable lives without owning land are average persons4 ,what they do any other person could do if placed in the same circumstances4 ,therefore1 private landownership is not directly necessary for the welfare of any individual4 ,private ,landownership ,indirectly ,necessary for ,individual ,welfare ,in our present industrial civilisation1 however1 private landownership is indirectly necessary for the welfare of the individual4 ,it is said to be indirectly necessary because it is necessary as a social institution1 rather than as something immediately connected with individual needs as such4 ,it is not1 indeed1 so necessary that society would promptly go to pieces under any other form of land tenure4 ,as we have seen in the last chapter1 it is necessary in the sense that it is capable of promoting the welfare of the average person1 of the majority of persons1 to a much greater degree than ,state ownership4 ,it is necessary for the same reason and in the same way as a civil police force4 ,as the ,state is obliged to maintain a police force1 so it is obliged to maintain a system of private landownership4 ,as the citizen has a right to police protection1 so he has a right to the social and economic advantages which are connected with the system of private ownership of land4 ,these rights are natural1 derived from the needs of the individual in society1 not dependent upon the good pleasure of the city or the ,state4 ,they are individual rights to the presence and benefits of these social institutions4 ,but man's rights in the matter of land tenure are more extensive than his rights with regard to a police force4 ,they are not restricted to the presence and functioning of a social institution4 ,every citizen has a natural right to police protection1 but no citizen has a natural right to become a policeman4 ,the welfare of the citizen is sufficiently looked after when the members of the police are selected by the authorities of the city4 ,on the contrary1 his welfare would not be adequately safeguarded if the ,state were to decide who might and who might not become landowners4 ,in the first place1 the ideal condition is that in which all persons can easily become actual owners4 ,in the second place1 the mere legal opportunity of becoming owners is a considerable stimulus to the energy and ambition of all persons1 even of those who are never able to convert it into an economic opportunity4 ,therefore1 only a very powerful reason of social utility would justify the ,state in excluding any person or any class from the legal power to own land4 ,no such reason exists2 and there are many reasons why the ,state should not attempt anything of the sort4 ,as a consequence of these facts1 every person1 whether an actual owner or not1 has a natural right to acquire property in land4 ,this right is evidently a necessary condition of a fair and efficient system of private ownership1 which is in turn a necessary condition of individual welfare4 ,the right of private landownership is1 therefore1 an indirect right2 but it is quite as valid and quite as certain as any other natural right4 ,now this right is certainly valid as against complete ,socialism1 which includes ,state management and use1 as well as ,state ownership4 ,is it valid against the ,single ,tax system1 or against such modified forms of ,socialism as would allow the individual to rent and use the land as an independent cultivator with security of tenure8 ,would the introduction of some such scheme in a country in which only a small minority of the population were actual owners1 constitute a violation of individual rights8 ,while we cannot with any feeling of certainty return an affirmative answer to these questions1 we can confidently affirm that reform within the lines of private ownership would in the long run be more effective1 and1 therefore1 that the right of private ownership is probably valid even against these modified forms of common ownership4#cf ,excessive ,interpretations of the ,right of ,private ,landownership ,the indirect character of the right of private landownership1 its relativity to and dependence upon social conditions1 is not always sufficiently grasped by either its advocates or its opponents4 ,in the writings of the former we sometimes find language which suggests that this right is as independent of social conditions as the right to marriage or the right to life4 ,the ,state has no right to abolish private property in land because private property is not a social right1 but an individual right derived from nature1 not derived from the ,state4 ,it exists for human welfare1 not merely for civil welfare4#cg ,the only defect in this reasoning is that the premises do not justify the conclusion4 ,undoubtedly the ,state may not abolish private ownership1 so long as it is necessary for human or individual welfare2 but1 when this necessity ceases1 the moral justification of the institution likewise disappears4 ,the institution may then be abolished1 somehow1 by some agency1 without any violation of individual rights4 ,why may not the task of abolition be performed by the ,state8 ,no other agency is available4 ,the assertion that the ,state is incompetent to decide whether the institution of private ownership has outlived its usefulness1 is entirely gratuitous2 besides1 it implies that a small minority of selfishly interested persons may justly require the continuation of a system of land tenure which has become harmful to the overwhelming majority of the community4 ,extreme defences of the right of private landownership are largely responsible for the misconceptions of many of its opponents4 ,occasionally the latter represent this right as an a priori monstrosity which is serenely independent of the facts of life and industry4 ,while such persons are at liberty to reject the interpretations of facts contained in the preceding paragraphs1 they cannot reasonably deny the logic of the process which has led to the conclusion that the individual has a natural right to own land4 ,so much for the natural right of landownership as seen in the light of reason4 ,let us now consider it briefly from the side of doctrinal authority1 namely1 the writings of the ,fathers and ,theologians of the ,church1 and the formal pronouncements of the ,popes4 ,the ,doctrine of the ,fathers and ,theologians ,some of the ,church ,fathers1 particularly ,augustine1 ,ambrose1 ,basil1 ,chrysostom1 and ,jerome1 denounced riches and the rich so severely that they have been accused of denying the right of private ownership4 ,the facts1 however1 are that none of the passages upon which this accusation is based proves it to be true1 and that in numerous other passages all of these writers explicitly affirm that private ownership is lawful4#ch ,speaking generally1 we may say that they taught the moral goodness of private ownership without insisting upon its necessity4 ,hence they cannot be cited as authorities for the doctrine that the individual has a natural right to own land4 ,some of the great theologians of medival and post-medival times denied this right1 inasmuch as they denied that the institution of private ownership was imposed or commanded by the natural law4 ,among them are ,scotus1#ci ,molina1#dj ,lessius1#da ,suarez1#db ,vasquez1#dc and ,billuart4#dd ,since private ownership is not absolutely necessary to human welfare in all forms of society1 it cannot1 in their view1 be regarded as strictly prescribed by the natural law1 nor be instituted without the positive action of civil authority1 or the consent of the community4 ,nevertheless they all admit that it is much better than common ownership in contemporary societies4 ,the difference between their position and that of de ,lugo1 for example1 seems to be two-fold3 ,first1 they put stronger emphasis upon the doctrines that the earth belongs to all men in common1 that in the absence of original sin ownership would likewise have been common1 and that this arrangement is therefore in a fundamental sense normal1 agreeing with nature and the natural law2 and1 second1 they put a lower estimate upon the superiority of private ownership even in contemporary conditions4 ,in a word1 they denied that private ownership was so much better than any alternative system as to confer upon the individual a natural right in the strict sense2 that is1 a right which laid upon the ,state the correlative obligation of maintaining the institution of private landownership4 ,on the other hand1 many of the ablest theologians of the same period declared that private ownership was enjoined by the natural law and right reason1 and consequently that it was among the individual's natural rights4 ,according to ,st4 ,thomas ,aquinas1 private property is necessary for human life1 and is one of those social institutions which are prescribed by the jus gentium2 and the content of the jus gentium is not determined by positive law1 but by the dictates of natural reason1 by natural reason itself4#de ,these statements seem to convey the doctrine of natural right as clearly as could be expected in the absence of an explicit declaration4 ,cardinal de ,lugo sets forth the same teaching somewhat more compactly1 but in substantially the same terms3 ,speaking generally1 a division of goods and of ownership-titles proceeds from the law of nature1 for natural reason dictates such division as necessary in the present circumstances of fallen nature and dense populations4#df ,this view is to-day universally accepted among ,catholic writers4 ,the ,teaching of ,pope ,leo ,,xiii ,the official teaching of the ,church on the subject is found in the ,encyclical1 ,on the ,condition of ,labour1 by ,pope ,leo ,,xiii4 ,in this document we are told that the proposals of the ,socialists are manifestly against justice2 that the right of private property in land is granted to man by nature2 that it is derived from nature not from man1 and the ,state has the right to control its use in the interest of the public good alone1 but by no means to abolish it altogether4 ,these statements the ,pope deduces from a consideration of man's needs4 ,private property in land is necessary to satisfy the wants1 present and future1 of the individual and his family4 ,were the ,state to attempt the task of making this provision1 it would exceed its proper sphere1 and produce manifold domestic and social confusion4 ,while ,pope ,leo defines the natural right of private ownership as incompatible with complete ,socialism1 that is1 collective use as well as collective ownership1 his statements cannot fairly or certainly be interpreted as condemning the ,single ,tax system1 or any other arrangement which would leave to the individual managerial use and secure possession of his holding1 together with the power to transmit and transfer it1 and full ownership of improvements4 ,these are the only elements of ownership which the ,holy ,father defends1 and which he insists upon as necessary4 ,the one element of private ownership which the ,single ,tax system would exclude2 namely1 the power to take rent from and profit by the changes in land values1 finds no place among the advantages of private ownership enumerated in the ,encyclical4 ,there is1 indeed1 one passage of the ,encyclical in which ,pope ,leo seems to allude to the ,single ,tax1 or to some similar proposal4 ,he expresses his amazement at those persons who assert that it is right for private persons to have the use of the soil and its various fruits1 but that it is unjust for any one to possess outright either the land on which he has built1 or the estate which he has brought under cultivation4 ,but those who deny these rights do not perceive that they are defrauding man of what his own labour has produced4 ,for the soil which is tilled and cultivated with toil and skill utterly changes its conditions3 it was wild before1 now it is fruitful2 was barren1 but now brings forth in abundance4 ,that which has thus altered and improved the land becomes so truly a part of itself as to be in great measure indistinguishable and inseparable from it4 ,is it just that the fruit of a man's own labour should be possessed and enjoyed by any one else8 ,as effects follow their cause1 so is it just and right that the results of labour should belong to those who have bestowed their labour4 ,in this passage we find two principal statements3 first1 that those persons are in error who declare full private ownership of land to be unjust2 and1 second1 that it is wrong to deprive a man of the improvements which he makes in the soil4 ,now the first of these propositions does not touch the ,single ,tax system as such2 it only condemns the assertion of ,henry ,george that private ownership is essentially unjust4 ,it is directed against one of the arguments for the system1 not against the system itself4 ,more specifically1 it is a refutation of an argument against private land ownership1 rather than a positive attack upon any other system4 ,it could be accepted by any ,single ,taxer who does not agree with ,henry ,george that the present system is essentially unjust4 ,the second proposition does not apply to the ,single ,tax system at all2 for the latter would concede to the individual holder the full ownership and benefit of improvements2 and it could easily be so administered as to protect him against injury in any case in which improvement values were not exactly and clearly distinguishable from land values4 ,while ,henry ,george opposed the doctrines of the ,encyclical in his ,open ,letter to ,pope ,leo ,,xiii1 all his arguments are directed against the proposition that private ownership is right and just4 ,the ,letter is an attack upon private ownership rather than a defence of the ,single ,tax4 ,apparently its author did not find that ,pope ,leo condemned any positive or essential element of the ,single ,tax as a proposed system of land tenure4 ,if the rejoinder be made that ,pope ,leo could have had no other group of persons in mind than the ,single ,taxers1 when he wrote the paragraph quoted above1 our answer must be that he did not definitely identify them1 either by naming them1 as he named the ,socialists1 or by any other sufficiently explicit designation4 ,applying to this paragraph the customary and recognised rules of interpretation1 we are obliged to conclude that it does not contain an explicit condemnation of the ,single ,tax system4 ,to put the substance of this chapter in two sentences3 ,private landownership is a natural right because in present conditions the institution is necessary for individual and social welfare4 ,the right is certainly valid as against complete ,socialism1 and probably valid as against any such radical modification of the present system as that contemplated by the thoroughgoing ,single ,taxers4 ,,footnotes3 #cd ,the marriage rights of criminals1 degenerates1 and other socially dangerous persons1 are passed over here as not pertinent to the present discussion4 ,for the same reason nothing is said of the perfectly valid social argument in favour of the individual right of marriage4 #ce ,cf4 ,vermeersch1 ,quaestiones de ,justitia1 no4 #bjd4 #cf ,the argument in the text is obviously empirical1 drawn from consequences4 ,there is1 however1 a putatively intrinsic or metaphysical argument which is sometimes urged against the justice of the ,single ,tax system4 ,it runs thus3 since the fruits of a thing belong to the owner of the thing1 res fructificat domino1 rent1 which is the economically imputed fruit of land1 necessarily and as a matter of natural right should go to the owner of the land4 ,as will be shown later1 the formula at the basis of this contention is not a metaphysical principle at all1 but a conclusion from experience4 ,like every other formula or principle of property rights1 it must find its ultimate basis in human welfare4 #cg ,liberatore1 ,principles of ,political ,economy1 pp4 #acj1 #acd4 #ch ,cf4 ,vermeersch1 op4 cit41 no4 #baj2 ,ryan1 ,alleged ,socialism of the ,church ,fathers4 #ci ,in ,,iv ,sent41 d4 #ae1 q4 #b1 n4 #e2 and ,reportata parisiensia1 d4 #ae1 q4 #d1 n4 #g-ab4 #dj ,de ,justitia et ,jure1 tr4 #b1 d4 #ah and #bj4 #da ,de ,justitia et ,jure1 c4 #e1 n4 #c4 #db ,de ,legibus1 l4 #b1 c4 #ad1 n4 #ac and #af4 #dc ,in ,summa1 #ama #b;ae1 d4 #aeg1 n4 #ag4 #dd ,de ,justitia et ,jure1 d4 #d1 a4 #a4 #de ,summa ,theologica1 #b;a #b;ae1 q4 #eg1 a4 #b and #c4 #df ,de ,justitia et ,jure1 d4 #f1 s4 #a1 n4 #f4 ,,chapter ,,vi ,,limitations ,,on ,,the ,,landowner',s ,,right ,,to ,,rent ,the chapters immediately preceding have led to the conclusion that private ownership is the best system of land tenure1 and that the individual has a natural right to participate in its advantages4 ,although this system confers upon the individual owner the power to take the rent of the land1 we are not logically debarred from raising the question whether this power is a necessary part of the moral rights of landownership4 ,does the right to own a piece of land necessarily include the right to take its rent8 ,by what ethical principle of distribution is the landowner justified in appropriating a revenue in return for which he has performed no labour1 nor made any sacrifice8 ,this is unquestionably what happens when a man hires out his land to another4 ,and in conditions of perfect competition1 those owners who operate their own land are fully remunerated for their labour in the form of profits4 ,over and above this sum they receive rent1 the payment that they could get from the land if they were to let its use to tenants4 ,in the normal situation1 therefore1 rent is a workless income4 ,on what moral ground may it be taken by the landowner8#dg ,the fact that we have rejected the ,single ,tax and the confiscation of rent by the community1 does not of itself commit us to the conclusion that the private owner has a moral right to receive rent4 ,we have condemned the ,state appropriation of rent on the assumption that it would take place without a similar confiscation of interest4 ,such discrimination would be grossly unfair2 for it would cause land values to sink to zero1 while leaving the value of capital substantially undisturbed4 ,to carry out such a programme would be to treat property owners unequally1 to penalise one set of beneficiaries of workless incomes1 while leaving another set untouched4 ,consequently1 the ,state is not justified in confiscating rent unless it is justified in confiscating or prohibiting interest2 and the landowner is as fully justified in taking rent as the capital owner is in taking interest4 ,the contention of the ,single ,taxer that ownership of the former kind is morally wrong1 while ownership of capital is morally legitimate1 has already received sufficient discussion4 ,the specific question remains1 therefore1--whether the landowner and the capitalist are justified in receiving and retaining their workless incomes4 ,inasmuch as the principles and pertinent facts involved in this question can be more effectively and more conveniently discussed in relation to interest than in relation to rent1 the solution will be deferred to the chapters on interest4 ,assuming provisionally that the outcome of the discussion will be favourable to the claims of the landowner1 let us inquire whether he always has a moral right to all the rent4 ,the parallel question regarding the capitalist will be considered in connection with the right of the labourer to a living wage4 ,the ,tenant's ,right to a ,decent ,livelihood ,the actual payments made by tenants to landowners sometimes leave the former without the means of decent living4 ,such had been the condition of a large part of the ,irish tenant farmers before #ahha1 when the ,land ,courts were established4 ,in the course of twenty-five years these courts reduced the rents by twenty per cent4 on the average in upwards of half a million cases4 ,while a part of the reductions was intended to free the tenants from the unjust burden of paying rent on their own improvements1 another part was undoubtedly ordered on the theory that the tenants were entitled to retain a larger share of the product for their own support4 ,yet the latter portion of the reduction apparently represented true economic rent2 for it was included in the difference between the product and the current cost of production2 it was included in the amount that men in ,ireland were willing to pay for the use of land4 ,it was a part of the surplus that they had left after defraying their expenditures for capital and labour4 ,to be sure1 the tenants in some other countries1 say1 the ,united ,states1 would not have been satisfied with such a small remuneration1 and would not have handed over so much to the landlord2 but if the concept of economic rent is to have any serviceable meaning it must be determined by the actual returns to capital and labour in each locality1 and not by the standards of some other place which are assumed to be normal4 ,in any case1 the ,irish ,land ,courts did reduce the rents below the level fixed by competition1 by the unregulated forces of supply and demand4 ,was this treating the landlords justly8 ,may a tenant ever retain a part of the rent which the free course of competition would yield to the landowner8 ,here we must distinguish between the tenant who is and the tenant who is not in possession of a holding sufficiently large to require all the time and labour of a cultivator possessing average efficiency4 ,the tenant who controls and cultivates less than this amount of land ought not to expect to get all his livelihood therefrom4 ,failure to do so would not necessarily mean that he was paying exorbitant rent4 ,holdings of this sort are rightly called uneconomic2 that is1 they are too small to permit a profitable and reasonable application of labour and capital4 ,on such holdings the fair rent would be that amount per acre which would be regarded as fair for the use of the same land held in farms of economic size4 ,the proper recourse for the occupiers of uneconomic holdings is to get control of more land1 which is exactly what has been happening in ,ireland through the action of the ,congested ,districts ,board4 ,this brings us to the case of the man who cannot pay the competitive rent on a holding of normal size1 and have sufficient left to provide himself and family with a decent livelihood4 ,the fundamental reason why the rent is so high is to be found in the economic weakness of the great mass of the tenants1 who can neither emigrate to another country nor get a better living as wage earners in their own4 ,their predicament is exactly the same as that of the helpless and unskilled labourers who are compelled by the force of competition to accept less than living wages4 ,in these circumstances it seems clear that a government commission would be justified in reducing the rents to such a level as would leave the tenants of average efficiency on normal holdings the means of maintaining a decent standard of living4 ,in such cases1 then1 the landowner has not a right to the full economic or competitive rent4 ,his right thereto is morally inferior to the tenant's right to a decent livelihood1 just as the capitalist-employer's right to the prevailing rate of interest is morally inferior to the labourer's right to a living wage4 ,neither in the one case nor in the other is mere competition the final determinant and measure of justice4 ,it has no moral validity when it comes into conflict with man's natural right to get a reasonable livelihood on reasonable conditions from the bounty of the earth4 ,these fundamental questions will be discussed at length in the chapters on wages4 ,to the possible objection that the concept of a normal holding is vague1 the sufficient reply is that in practice it can be estimated with as much definiteness as the concept of the average labourer4 ,as we see from the history of the ,irish ,land ,courts and their ,judicial ,rents1 it can be defined with sufficient accuracy to serve the ends of practical justice4 ,more than this is not attained in any department of human relations1 particularly1 economic relations4 ,the ,labourer's ,claim ,upon the ,rent ,should any part of the rent go to the labourer8 ,let us take first the case of the labourer who is employed by a tenant1 and who is not occupied in personal service but in some productive task connected with the land4 ,like all other wage earners he has a right to a sufficient share of the product to afford him a decent livelihood4 ,since the tenant is the employer1 the director of the business1 and the owner of the product1 he rather than the landowner is the person who is primarily charged with the obligation of providing the labourer with a living wage4 ,as noted above1 his own claim to a decent livelihood is morally superior to the landlord's claim to rent2 but if1 having taken this amount from the product1 he finds himself unable to pay living wages to all his employees unless he deducts something either from the normal interest-return on his own capital or from the rent that would ordinarily go to the landowner1 he is morally bound to choose the former course4 ,he1 not the landowner1 is the wage payer4 ,that he is obliged to provide living wages to his labour force even at the cost of interest on his own investment in the business1 is a proposition that will receive ample discussion and defence in a later chapter4#dh ,suppose1 however1 that the tenant has not the means of paying full living wages after turning into the wage fund all the money that he had hoped to retain as interest on his capital4 ,may he withhold from the landowner a sufficient portion of the rent to cover the deficit in wages8 ,were this action practicable it would be undoubtedly justifiable2 for the landowner's claim to rent is no stronger than the tenant-capitalist's claim to interest4 ,as claims upon the product1 both are morally weaker than the labourer's right to a living wage4 ,nevertheless1 the tenant who should attempt to carry out this course would probably be prosecuted for non-fulfilment of his contract with the landowner1 or would be evicted from the holding4 ,nor is the landowner obliged in such cases to give up the rent in order that a living wage may be paid to the tenant's labour force4 ,he cannot be certain that the failure of the latter to receive full living wages has not been due to inefficiency or fraudulent conduct on the part of the tenant4 ,moreover1 the landowner would be justified in seeking to protect himself against the recurrence of such situations by putting his land in charge of a more capable tenant1 or by selling it and investing or lending the money elsewhere4 ,however clear may be the abstract proposition that the claim to a living wage possessed by the employee of the tenant is superior to the claim to rent possessed by the landowner1 the difficulty of realising this right in practice is sufficient to relieve even conscientious proprietors from the obligation of giving up the rent for this purpose4 ,when the landowner is operating or cultivating his land himself1 he is evidently obliged to pay a living wage to all his employees at the expense of rent1 just as he is obliged to do so at the cost of interest on his artificial capital4 ,to be sure1 the first charge upon the product should be a decent livelihood for himself2 but1 when he has obtained this1 the right of his employees to a living wage is morally superior to his right to either rent or interest4 ,at present the ,state takes a part of the rent through taxation4 ,may it take a larger share without violating justice8 ,this question will be considered in the second chapter following4 ,in the meantime1 we shall examine the principal defects of the existing system of land tenure with a view to the suggestion of appropriate remedies1 whether through taxation or otherwise4 ,,footnotes3 #dg ,the assumption that perfect competition is even roughly approximated in relation to men who operate their own land1 and that they generally obtain an adequate return for their labour in addition to the sum that they might have obtained through hiring out their land1 may appear rather violent in view of the estimate that the average farmer in the ,united ,states gets only #djb annually in payment for the labour of himself and family4 ,see article on ,the ,farmer's ,income in the ,american ,economic ,review1 ,march1 #aiaf4 ,however1 this income is mostly in the form of food1 fuel1 and shelter1 which would cost very much more in the city2 consequently it is probably equivalent to an urban income of #fjj4 ,its value is still further enhanced by the farmer's independent position1 and by his expectation of profiting by the future increase of land values4 ,hence it would seem that the rent and interest allowance of #cbb might fairly be regarded as a surplus in excess of the necessary payment for labour4 #dh ,chapter xxii4 ,,chapter ,,vii ,,defects ,,of ,,the ,,existing ,,land ,,system ,starting from the principle that the rightness or wrongness of any system of land tenure is determined not by metaphysical and intrinsic considerations1 but by the effects of the institution upon human welfare1 we arrived at the conclusion that private landownership is not unjust1 so long as no better system is available4 ,by the same test of human welfare we found that it would be wrong to substitute a better system through the process of confiscating rent1 while leaving interest undisturbed4 ,a further step brought us to the conclusion that complete ,socialism would certainly1 and the complete ,single ,tax probably1 be inferior to the present system4 ,as a sort of corollary1 the social and moral superiority of private landownership was stated in terms of natural rights4 ,finally1 the question was raised whether the landowner has a right to take rent1 and to take all the rent4 ,in stating the superiority of the present system1 we explicitly noted that we had in mind the system as capable of improvement4 ,this implied that there are defects in the present form of land tenure1 and that these can be eliminated in such a way as to make the system more beneficial and more in harmony with the principles of justice4 ,in the present chapter we shall give a summary review of the principal defects1 and in the following chapter we shall suggest some methods of reform4 ,all the defects and abuses may conveniently be grouped under three heads3 ,monopoly2 ,excessive ,gains2 and ,exclusion from the ,land4 ,landownership and ,monopoly ,in the literature of the ,single ,tax movement the phrase1 land monopoly1 is constantly recurring4 ,the expression is inaccurate2 for the system of individual landownership does not conform to the requirements of a monopoly4 ,there is1 indeed1 a certain resemblance between the control exercised by the owner of land and that possessed by the monopolist4 ,as the proprietor of every superior soil or site has an economic advantage over the owner of the poorest soil or site1 so the proprietor of a monopolistic business obtains larger gains than the man who must operate in conditions of competition4 ,in both cases the advantage is based upon the scarcity of the thing controlled1 and the extent of the advantage is measured by the degree of scarcity4 ,nevertheless1 there is an important difference between landownership and monopoly4 ,the latter is usually defined as that degree of unified control which enables the persons in control arbitrarily to limit supply and raise price4 ,as a rule1 no such power is exercised by individuals1 or by combinations of individuals with regard to land4 ,the pecuniary advantage possessed by the landowner1 that is1 the power to take rent1 is conferred and determined by influences outside of himself1 by the natural superiority of his land1 or by its proximity to a city4 ,he can neither diminish the amount of land in existence nor raise the price of his own4 ,the former result is inhibited by nature2 the latter by the competition of other persons who own the same kind of land4 ,to be sure1 there are certain kinds of land which are so scarce and so concentrated that they do fall under true monopolistic control4 ,such are the anthracite coal mines of ,pennsylvania1 and some peculiarly situated plots in a few great cities1 for example1 land that is desired for a railway terminal4 ,but these instances are exceptional4 ,the general fact is that the owners of any kind of land are in competition with similar owners4 ,while the element of scarcity is common to landownership and to monopoly1 it differs in its operation4 ,in the case of monopoly it is subject1 within limits1 to the human will4 ,this difference is sufficiently important1 both theoretically and practically1 to forbid the identification or confusion of landownership with monopoly4 ,a notable illustration of such confusion is the volume by ,dr4 ,f4 ,c4 ,howe1 entitled1 ,privilege and ,democracy in ,america4 ,he maintains that bituminous coal1 copper ore1 and natural gas are true monopolies1 but gives no adequate proof to support this assertion4 ,moreover1 he exaggerates considerably the part played by landownership in the formation of industrial monopolies4 ,thus1 his contention that the petroleum monopoly is due to ownership of oil-producing lands is certainly incorrect2 for the ,standard ,oil ,company 7or companies7 has never controlled as much as half the supply of raw material4 ,the power of the ,standard does not rest upon a direct monopoly of the production of crude oil through ownership of the wells4#di ,perhaps the most remarkable misstatement in the volume is this3 ,the railway is a monopoly because of its identity with land4#ej ,now there are a few important railway lines traversing routes or possessing terminal sites which are so much better than any alternative routes or sites as to give all the advantages of a true monopoly4 ,but they are in a small minority4 ,in the great majority of cases1 a second parallel strip or parallel site could be found which would be equally or almost equally suitable4 ,neither the amount nor the kind of land owned by a railroad1 nor its legal privilege of holding land in a long1 continuous strip1 is the efficient cause of a railway monopoly4 ,to attribute the monopoly to land is to confound a condition with a cause4 ,one might as well say that the land underlying the wheat king's office is the cause of his corner in wheat4 ,it is true that in a few of the great cities the existing railroads may1 through their ownership of all the suitable terminal sites1 prevent the entrance of a competing line4 ,in the first place1 such instances are rare2 in the second place1 the fact that there are several roads already in existence shows that competition was possible without the entrance of another one4 ,the influence impelling them to form a monopoly for the regulation of charges is not their ownership of terminal sites4 ,no sort of uniform action with regard to terminals would produce any such effect4 ,the true source of the monopoly element in railways is inherent in the industry itself4 ,it is the fact of increasing returns1 which means that each additional increment of business is more profitable than the preceding one1 and that in most cases this process can be kept up indefinitely4 ,as a consequence1 each of two or more railroads between two points strives to get all the traffic2 then follows unprofitable rate cutting1 and finally combination4#ea ,the same forces would produce identical results if railroad tracks and terminals were suspended in the air4 ,dr4 ,howe asserts that the monopolistic character of such public utility corporations as street railways and telephone companies is due to their occupation of favoured sites4#eb ,how can this be true1 when it is possible to build a competing line on an adjoining and parallel street8 ,if the city forbids this1 and gives an exclusive franchise to one company1 this legal ordinance1 and not any exceptional advantage in the nature of the land occupied1 is the specific cause of the monopoly4 ,if the city permits a competing line1 and if the two lines sooner or later enter into a combination1 the true source and explanation are to be found in the fact of increasing returns4 ,combination is immeasurably more profitable than cut-throat competition4 ,moreover1 the evils of public service monopolies can be remedied through public control of charges and through taxation4 ,neither in railroads nor in public utilities is land an impelling cause of monopoly1 or a serious hindrance to proper regulation4 ,most of ,dr4 ,howe's exaggerations of the influence of land upon monopoly take the form of suggestion rather than of specific and direct statement4 ,when he attempts in precise language to enumerate the leading sources of monopoly1 he mentions four2 namely1 land1 railways1 the tariff1 and public service franchises4#ec ,nor is he able to prove his assertion that of these the most important is land4 ,nevertheless1 land is one of the foremost causes4 ,the most prominent examples of land monopoly in this country are the anthracite coal mines and the iron ore beds4 ,fully ninety per cent4 of our anthracite coal supply 7exclusive of ,alaska7 is under the control of eight railway systems which in this matter act as a unit4#ed ,according to ,dr4 ,howe1 the excessive profits reaped from this monopolistic control amount to between one hundred and two hundred million dollars annually4#ee ,in other words1 the consumers of anthracite coal must pay every year that much more than they would have expended if the supply had not been monopolised4 ,on the other hand1 the formation of monopoly would have been much more difficult if the railroads had been legally forbidden to own coal mines4 ,as things stand1 railway monopoly is an important cause of the anthracite coal monopoly4 ,some authorities are of the opinion that a similar condition of monopoly will ultimately prevail in the bituminous coal mines4 ,iron ore has been brought under the control of the ,united ,states ,steel ,corporation to such an extent that the ,commissioner of ,corporations writes3 ,indeed1 so far as the ,steel ,corporation's position in the entire iron and steel industry is of a monopolistic character1 it is chiefly through its control of ore holdings and the transportation of ore4#ef ,from this statement1 however1 it is evident that the monopoly depends upon control of transportation as well as upon ownership of the ore beds4 ,if the former were properly regulated by law1 the latter would not be so effective in promoting monopoly4 ,speaking generally1 we may say that when a great corporation controls a large proportion of the raw material entering into its manufactured products1 such control will supplement and reinforce very materially those other special advantages which make for monopoly4#eg ,prominent examples are to be found in steel1 natural gas1 petroleum1 and water powers4 ,in his ,report on ,water ,power ,development in the ,united ,states1 the ,commissioner of ,corporations 7,march #ad1 #aiab7 declared that the rapidly increasing concentration of control might easily become the nucleus of a monopoly of both steam and water power4 ,ten great groups of interests1 he said1 already dominated about sixty per cent4 of the developed water power1 and were pursuing a policy characterised by a large measure of agreement4#eh ,as a rough generalisation1 it would be fair to say that in one or two instances1 at least1 landownership is the chief basis1 and in several other cases an important contributory cause of monopoly4 ,even an approximately accurate estimate of the amount of money which consumers are compelled to pay annually for the products of such concerns over and above what they would pay if the raw material were not wholly or partially monopolised1 is obviously impossible4 ,it may possibly run into hundreds of millions of dollars4 ,excessive ,gains from ,private ,landownership ,the second evil of private landownership to be considered here1 is the general fact that it enables some men to take a larger share of the national product than is consistent with the welfare of their neighbours and of society as a whole4 ,as in the matter of monopoly1 however1 so here1 ,single ,tax advocates are chargeable with a certain amount of overstatement4 ,they contend that the landowner's share of the national product is constantly increasing1 that rent advances faster than interest or wages1 nay1 that all of the annual increase in the national product tends to be gathered in by the landowner1 while wages and interest remain stationary1 if they do not actually decline4#ei ,the share of the product received by any of the four agents of production depends upon the relative scarcity of the corresponding factor4 ,when undertaking ability becomes scarce in proportion to the supply of land1 labour1 and capital1 there is a rise in the remuneration of the business man2 when labour decreases relatively to undertaking ability1 land1 and capital1 there is an increase in wages4 ,similar statements are true of the other two agents and factors4 ,all these propositions are merely particular illustrations of the general rule that the price of any commodity is immediately governed by the movement of supply and demand4 ,in view of this fact1 it is not impossible that rent might increase to the extent described in the preceding paragraph4 ,all that is necessary is that land should become sufficiently scarce1 and the other factors sufficiently plentiful4 ,as a fact1 the supply of land is strictly limited by nature1 while the other factors can and do increase4 ,there are1 however1 several forces which neutralise or retard the tendency of land to become scarce1 and of rent to rise4 ,modern methods of transportation1 of drainage1 and of irrigation have greatly increased the supply of available land1 and of commercially profitable land4 ,during the nineteenth century1 the transcontinental railroads of the ,united ,states made so much of our ,western territory accessible that the value and rent of ,new ,england lands actually declined2 and there are still many millions of acres throughout the country which can be made productive through drainage and irrigation4 ,in the second place1 every increase of what is called the intensive use of land gives employment to labour and capital which otherwise would have to go upon new land4 ,in ,america this practice is only in its infancy4 ,with its inevitable growth1 both in agriculture and mining1 the demand for additional land will be checked1 and the rise in land values and rents be correspondingly diminished4 ,finally1 the proportion of capital and labour that is absorbed in the manufacturing1 finishing1 and distributive operations of modern industry is constantly increasing4 ,these processes call for very little land in comparison with that required for the extractive operations of agriculture and mining4 ,an increase of one-fifth in the amount of capital and labour occupied in growing wheat or in taking out coal1 implies a much greater demand for land than the same quantity employed in factories1 stores1 and railroads4#fj ,as a consequence of these counteracting influences1 it appears that the share of the landowners has not increased disproportionately4 ,the most comprehensive endeavour yet made to determine the growth and relative size of the different shares of the national product is embodied in ,professor ,w4 ,i4 ,king's volume1 ,the ,wealth and ,income of the ,people of the ,united ,states1 published in #aiae4 ,it estimates that the total annual income of the nation increased from a little less than two and one-fourth billions of dollars in #ahej to a little more than thirty and one-half billions in #aiaj1 or slightly more than fifteen times4 ,during the same period rent1 the share of the landowners1 advanced from #agj1fjj1jjj to #b1fgc1ijj1jjj1 or about fifteen and three quarter times4 ,in the year #aiaj1 therefore1 the landowners were receiving but a very small fraction more of the national product than their predecessors obtained sixty years earlier4#fa ,as to the relative size of the shares going to the different factors in #aiaj1 the figures are even more remarkable4 ,wages and salaries absorbed #df4i per cent42 profits1 #bg4e per cent42 interest1 #af4h per cent42 and rent1 only #h4h per cent4#fb ,this was exactly the same per cent4 that the landowners received in #ahfj4 ,to be sure1 these figures are only approximations1 but they are probably the most reliable that can be obtained from our notoriously incomplete statistics1 and they will deserve respectful consideration until they have been refuted by specific criticism and argument4 ,in the opinion of their compiler3 ,the figures for wages and salaries are believed to be fairly accurate2 those for rent are thought to have an error of not more than twenty per cent4 ,the separation of the share of capital from that of the entrepreneur is very crudely done and no stress should be laid on the results4 ,the total for all shares is thought to be more accurate than the mode of distribution1 and for the last three census years should come within ten per cent4 of the correct statement of the national income4 ,for earlier years the error should not be over twenty per cent4 at the outside4#fc ,if we make the maximum allowance for error in reference to the share of the landowner1 and assume that the rent estimate is twenty per cent4 too low1 we find that it was still only ten and one-half per cent4 of the total product in #aiaj1 which represents an increase of less than three per cent4 since #ahej4 ,it is significant that ,dr4 ,howe1 who has no bias toward belittling the share of the landowner1 suggested as his minimum and maximum estimates of the land values of the country in #aiaj figures which are respectively fifty per cent4 below and only five per cent4 above the amount taken by ,professor ,king as the basis for his estimate of rent4#fd ,there is1 consequently1 a strong presumption that ,professor ,king is right when he stigmatises as absurd the contention of the ,single ,taxer1 that all the improvements of industry result only in the enrichment of the landlord4444 ,the value of our products has increased since #ahej to the extent of some twenty-eight billions of dollars1 while rent has gained less than three billions4 ,evidently it has captured but a meagre part of the new production4#fe ,there are strong indications1 however1 that the per cent4 of the product going to the owners of land has increased considerably in the last twenty years1 and that this movement will continue indefinitely4 ,according to ,professor ,king's calculations1 the per cent4 of the total product assignable as rent advanced from #g4h in #aijj to #h4h in #aiaj1 which meant that during that period the national income increased only #gj per cent41 while the share of the landowner increased #ia per cent4#ff ,it is true that a disproportionate advance in rent has occurred between other census years1 only to be neutralised by subsequent decreases2 but the present instance seems to include certain features which did not characterise any of the former gains in the relative share of the landowner4 ,since #ahif the prices of food products rose most rapidly in the case of meat1 dairy products1 and cereals1 which were derived directly from the land4 ,the prices of raw materials show a like relation4 ,timber1 grain1 and other raw materials obtained directly from the land have risen rapidly in price1 while semi-manufactured articles have increased less rapidly1 or have decreased in price4444 ,there is no parallel in any other field to the advance in those land values upon which civilisation most directly depends--timber lands1 fertile agricultural land1 and land in large commercial and industrial centres4 ,the recent rise in land values has been little short of revolutionary4#fg ,between #aijj and #aiaj the value of farm lands per acre in the ,united ,states advanced #ajh4a per cent4#fh ,during the eight years beginning with ,july #a1 #aijf1 the value of land in ,greater ,new ,york increased something more than one-third2 in the principal cities of ,new ,jersey1 and in ,worcester1 ,washington1 ,boston1 and ,buffalo1 somewhat less2 in ,springfield and ,holyoke1 considerably more4 ,in the most recent ten years for which figures are available 7since #aijj in every case7 the land values of ,milwaukee1 ,st4 ,louis and ,san ,francisco averaged only a slight degree of expansion1 while those of ,kansas ,city doubled1 and those of ,houston1 ,dallas1 ,los ,angeles1 and ,seattle trebled4 ,to quote ,professor ,nearing1 from whose compilations these estimates have been summarised3 ,the total extent of the increase in ,american city land values may be hinted at rather than stated with any certainty4 ,the scattering instances in which land and improvements are separately assessed led to the conclusion that in a large1 well-established city1 growing at approximately the same rate as the other portions of the ,united ,states1 the land value is doubling in from ten to twenty-five years4 ,in the new1 rapidly growing city of the middle and far ,west and in some of the smaller cities of the ,east1 the ratio of increase in land values is far greater1 amounting to two-fold or even three-fold in a decade4 ,in a few instances the rate of increase is much smaller1 and in one case1 ,jersey ,city1 land values over a period of seven years have actually decreased4444 ,nevertheless1 the few available long range figures indicate a widespread and considerable increase in ,american city land values4#fi ,the rise in the value of timber lands during the last thirty years has been1 in the words of the federal investigators1 enormous4 ,for the ten-year period ending in #aijh1 the value of a given piece of southern pine taken at random is likely to have increased in any ratio from three-fold to ten-fold4 ,about the same ratio of increase obtained in the ,pacific ,northwest1 and a somewhat smaller increase in the region of the ,great ,lakes4#gj ,while a considerable decline has taken place since #aijh1 it is only temporary2 for the demand for timber is notoriously increasing several times as fast as the supply4 ,that this upward movement in the value of all three kinds of land will continue without serious interruption1 seems to be as nearly certain as any economic proposition that is dependent upon the future4 ,although millions of acres of arable lands are still unoccupied in the ,united ,states and ,canada1 the far greater part of them require a comparatively large initial outlay for draining1 clearing1 irrigation1 etc41 in order to become productive4 ,hence there is no likelihood that they can be brought under cultivation fast enough to halt or greatly retard the advancing values which follow upon the growth of population and the increased demand for agricultural products4 ,in all probability the greater part of them will not come into use until the prices of farm products have risen above the present level4 ,obviously this supposes an increase in the value of all farm land1 old and new4 ,nor is the adoption of better methods of farming likely to check seriously the upward movement4 ,between #aijj and #aiaj the urban population of ,america increased #cd4h per cent41 as against a gain of only #ba per cent4 in the total population4 ,this disproportionate growth in the number of the city dwellers will if continued make certain what is in any case extremely probable1 a steady and considerable advance in urban land values and rents4 ,the circumstance that these remarkable increases in land values are a comparatively recent phenomenon has prevented them from receiving the attention that they deserve1 either from the general public or from the students of economic and social problems4 ,the total value of the land of the country has increased steadily from decade to decade1 but so has the total value of capital1 and even between #aijj and #aiaj the increase in the share of the capitalist was exactly equal to the increase in the share of the landowner1 that is1 #ia per cent4#ga ,those persons who complacently make such comparisons overlook the new and significant feature of the more recent advances in land value2 namely1 that they are due in only a slight degree to an expansion of the area of land under consideration4 ,the increases of value quoted in the foregoing paragraphs are increases per acre and per urban lot1 not increases derived from bringing new land under cultivation or new tracts within municipal limits4 ,on the other hand1 the increases in the value of capital1 now as always1 represent for the most part concrete additions to the existing stock of productive instruments4 ,except where monopoly holds sway1 particular capital instruments1 unlike particular pieces of land1 do not increase in value4 ,hence the owner of a given amount of capital does not profit by the advance in the total value of capital as the owner of the average parcel of land profits by the general increase in the value of land4 ,this means that all those consumers of products who are not landowners must pay an increasing tribute to those who are landed proprietors4 ,so much for the proportion of the national product which goes to the landowning class4 ,let us next inquire how the landowner's share1 or rent1 is distributed throughout the population4 ,if it were equally divided among all persons1 its increase relatively to the shares of the other factors would1 from the social viewpoint1 be a matter of considerable indifference4 ,on the other hand1 if it is secured by a minority of the population1 and if that minority tends to become smaller as the share itself becomes larger1 we have a socially undesirable condition4 ,in the twenty years between #ahij and #aiaj1 the proportion of farm families in the ,united ,states owning farm land1 mortgaged or unmortgaged1 declined from #fe4i per cent4 to #fb4h per cent42 the proportion of urban families owning their homes1 encumbered or unencumbered1 increased from #cf4i to #ch4d per cent41 and the proportion of all families owning homes1 encumbered or unencumbered1 fell from #dg4h to #de4h per cent4 ,of the homes owned by their occupiers1 #bh per cent4 were mortgaged in #ahij1 and #cb4h per cent4 in #aiaj4gb ,while a decline of two per cent4 in the home owning and landowning families in twenty years1 and an increase of almost five per cent4 in the number of those families who hold their property subject to encumbrance1 may not seem very serious in themselves1 they indicate a definitely unhealthy trend4 ,not only are the landowning families in a minority1 but the minority is becoming smaller4 ,nevertheless1 when we consider the amount of gains accruing to the average member of the landowning class1 we do not find that it is unreasonably large4 ,the great majority of landed proprietors have not received1 nor are they likely to receive1 from their holdings incomes sufficiently large to be called excessive shares of the national product4 ,their gross returns from land have not exceeded the equivalent of fair interest on their actual investment1 and fair wages for their labour4 ,the landowners who have been enabled through their holdings to rise above the level of moderate living constitute a comparatively small minority4 ,and these statements are true of both agricultural and urban proprietors4 ,it is true that a considerable number of persons1 absolutely speaking1 have amassed great wealth out of land4 ,it is a well known fact that land was the principal source of the great medival and post-medival fortunes1 down to the end of the eighteenth century4 ,the historical foundation of capitalism is rent4#gc ,capitalism had its beginning in the revenue from agricultural lands1 city sites1 and mines4 ,a conspicuous example is that of the great ,fugger family of the sixteenth century1 whose wealth was mostly derived from the ownership and exploitation of rich mineral lands4#gd ,in the ,united ,states very few large fortunes have been obtained from agricultural land1 but the same is not true of mineral lands1 timber lands1 or urban sites4 ,the growth of cities has1 through real estate speculation and incremental income1 made many of our millionaires4#ge ,as with the unearned income of city land1 our mineral resources have been conspicuously prolific producers of millionaires4#gf ,the most striking instance of great wealth derived from urban land is the fortune of the ,astor family4 ,while gains from trading ventures formed the beginning of the riches of the original ,astor1 ,john ,jacob1 these were a comparatively insignificant portion of the great fortune which he transmitted to his descendants4#gg ,at his death1 in #ahdh1 ,john ,jacob ,astor's real estate holdings in ,new ,york ,city were valued at eighteen or twenty million dollars4 ,to-day the ,astor estate in that city is estimated at between #dej and #ejj millions1 and within a quarter of a century will not improbably be worth one billion dollars4#gh ,according to an investigation made in #ahib by the ,new ,york ,tribune1 #bf4d per cent4 of the millionaire fortunes of the ,united ,states at that time were traceable to landownership1 while #da4e per cent4 were derived from competitive industries which were largely assisted by land possessions4#gi ,the proportion of such fortunes that is due1 directly or indirectly1 in whole or in part1 to landownership has undoubtedly increased considerably since #ahib4 ,with regard to great individual or corporate land holdings1 there exist no adequate statistics4 ,a few conspicuous instances may be cited4 ,the ,united ,states ,steel ,corporation owns lands yielding iron ore1 coal1 coke1 and timber which are valued by the ,commissioner of ,corporations at nearly #bej million dollars1 and by the ,steel ,corporation itself at more than #hjj million dollars4#hj ,three companies own nearly eleven per cent41 and #aie individuals or corporations own #dh per cent4 of all the privately owned timber in the ,united ,states4#ha ,the ,united ,states ,census of #aiaj shows that the number of farms containing #ejj acres or over was about #age1jjj1 and comprised ten per cent4 of the total farm acreage4 ,one hundred and fifty persons and corporations are said to own #bbj1jjj1jjj acres of various kinds of land4 ,none of these holders has less than ten thousand acres1 and two of the syndicates possess fifty million acres each4#hb ,exclusion from the ,land ,one of the most frequent charges brought against the present system of land tenure is that it keeps a large proportion of our natural resources out of use4 ,it is contended that this evil appears in three principal forms3 owners of large estates refuse to break up their holdings by sale2 many proprietors are unwilling to let the use of their land on reasonable terms2 and a great deal of land is held at speculative prices1 instead of at economic prices4 ,so far as the ,united ,states are concerned1 the first of these charges does not seem to represent a condition that is at all general4 ,although many holders of large mineral and timber tracts seem to be in no hurry to sell portions of their holdings1 they are probably moved by a desire to obtain higher prices rather than to continue as large landowners4 ,as a rule1 the great landholders of ,america are without those sentiments of tradition1 local attachment1 and social ascendency which are so powerful in maintaining intact the immense estates of ,great ,britain4 ,on the contrary1 one of the common facts of to-day is the persistent effort carried on by railroads and other holders of large tracts to dispose of their land to settlers4 ,while the price asked by these proprietors is frequently higher than that which corresponds to the present productiveness of the land1 it is generally as low as that which is demanded by the owners of smaller parcels4 ,to be sure1 this is one way of unreasonably hindering access to the land1 but it falls properly under the head of the third charge enumerated above4 ,there is no sufficient evidence that the large landholders are exceptional offenders in refusing to sell their holdings to actual settlers4 ,the assertion that unused land cannot be rented on reasonable terms is in the main unfounded1 so far as it refers to land which is desired for agriculture4 ,as a rule1 any man who wishes to cultivate a portion of such land can fulfil his desire if he is willing to pay a rent that corresponds to its productiveness4 ,after all1 landowners are neither fools nor fanatics3 while awaiting a higher price than is now obtainable for their land1 they would prefer to get from it some revenue rather than none at all4 ,as a matter of fact1 almost all the agricultural land that is immediately available for renting1 is constantly under cultivation4 ,this refers to land that is already under the plough1 and is provided with buildings and other necessary improvements4 ,practically none of this is out of use4 ,new land which is without buildings is not wanted by tenants1 unless it is convenient to their residences1 because they do not desire to expend money for permanent improvements upon land that they do not own4 ,true1 the present owners of such land might erect buildings1 and then let it to tenants4 ,in so far as new land might profitably be improved and cultivated1 and in so far as the owners are unwilling or unable to provide the improvements1 the present system does keep out of use agricultural land that could be cultivated by tenants4 ,mineral and timber lands are sometimes withheld from tenants because the owners wish to limit the supply of the product1 or because they fear that a long-term lease would prevent them from selling the land to the best advantage4 ,as to urban sites1 the contention that we are now examining is generally true4 ,the practice of leasing land to persons who wish to build thereon does not1 with the exception of a very few cities1 obtain in the ,united ,states for other than very large business structures4 ,as a rule1 it does not apply to sites for residences4 ,the man who wants a piece of urban land for a dwelling or for a moderately sized business building cannot obtain it except by purchase4 ,cannot the land be bought at a reasonable price8 ,this brings us to the third and most serious of the charges concerning exclusion from the land4 ,since the value of land in most cities is rising1 and apparently will continue to rise more or less steadily1 the price at which it is held and purchasable is not the economic price but a speculative price4 ,it is higher than the capitalised value of the present revenue or rent4 ,for example3 if five per cent4 be the prevailing rate of interest1 a piece of land which returns that rate on a capital of one thousand dollars cannot be bought for one thousand dollars4 ,the purchaser is willing to pay more because he hopes to sell it for a still higher price within a reasonable time4 ,he knows that he cannot immediately obtain five per cent4 on the amount 7say1 #a1bjj dollars7 that he is ready to pay for the land1 but his valuation of it is not determined merely by its present income-producing power1 but by its anticipated revenue value and selling value4#hc ,the buyer will pay more for such land than for a house which yields the same return2 for he knows that the latter will not1 and hopes that the former will1 bring a higher return and a higher price in the future4 ,wherever this discounting of the future obtains1 the price of land is unreasonably high1 and access to vacant land is unreasonably difficult4 ,this condition undoubtedly exists most of the time in the great majority of our larger cities4 ,men will not sell vacant land at a price which will enable the buyer to obtain immediately a reasonable return on his investment4 ,they demand in addition a part of the anticipated increase in value4 ,in the rural regions this evil appears to be smaller and less general4 ,the owners of unused or uneconomically used arable land are more eager to sell their holdings than the average proprietor of a vacant lot4 ,so far as this sort of land is concerned1 it is probable that most of the denunciation of land speculators and land monopolists overshoots the mark4 ,not the high price at which unused arable lands are held1 but the great initial cost of draining1 clearing1 or irrigating them1 is the main reason why they are not purchased by cultivators4 ,while no general and precise estimate can be given of the extent to which the speculative exceeds the actual rent-producing value of land in growing cities1 twenty-five per cent4 would not improbably be a fair conjecture4 ,even when a reaction occurs after a period of excessive land-booming1 the lower prices do not bring the manless land any nearer to the landless men4 ,only the few who possess ready money or excellent credit can take advantage of such a situation4 ,on the whole the evil that we are now considering is probably greater than any other connected with the private ownership of land4 ,all the tendencies and forces that have been described in the present chapter under the heads of ,monopoly1 ,excessive ,gains1 and ,exclusion from the ,land1 are in some degree real defects and abuses of the existing system of land tenure4 ,most of them do not seem to be sufficiently understood or appreciated by the more ardent defenders of private ownership4 ,to recognise them1 and to seek adequate correctives of them would seem to be the task of both righteousness and expediency4 ,in the next and final chapter of this ,section1 we shall consider certain remedies that seem to be at once effective and just4 ,,footnotes3 #di ,report of the ,commissioner of ,corporations on the ,petroleum ,industry1 ,part ,i1 p4 #h4 #ej ,p4 #ach4 #ea ,cf4 ,ely1 ,monopolies and ,trusts1 pp4 #ei1 sq4 #eb ,p4 #acc4 #ec ,pp4 #fh1 #fi4 #ed ,final ,report of the ,u4 ,s4 ,industrial ,commission1 p4 #dfc2 ,bliss1 ,new ,encyclopedia of ,social ,reform1 pp4 #bde1 #ggj2 ,van ,hise1 ,concentration and ,control1 pp4 #cb1 #cc4 #ee ,idem1 pp4 #df1 #dg2 cf4 ,final ,report of ,industrial ,commission1 pp4 #dfc-dfe4 #ef ,report of the ,commissioner of ,corporations on the ,steel ,industry1 ,part ,i1 p4 #fj4 #eg ,cf4 ,hobson1 ,the ,industrial ,system1 pp4 #aib-aig4 #eh ,pp4 #ae1 #af1 #bi-ca4 #ei ,cf4 ,progress and ,poverty1 books ,,iii and ,,iv4 #fj ,cf4 ,walker1 ,land and ,its ,rent1 pp4 #afh-ahb1 ,boston1 #ahhc4 #fa ,page #aeh4 #fb ,page #afj4 #fc ,page #aeh2 footnote4 #fd ,privilege and ,democracy1 p4 #cjg4 #fe ,page #afj4 #ff ,op4 cit41 pages #afj1 #aeh4 #fg ,professor ,nearing in ,the ,annals of the ,american ,academy of ,political and ,social ,science1 ,march1 #aiae4 #fh ,thirteenth ,census1 ,bulletin on ,farms and ,farm ,property1 page #a4 #fi ,the ,public1 ,nov4 #bf1 #aiae4 ,for an account of increases in the principal ,european cities1 see ,camille-,husymans1 ,la plus-value immobilire dans les communes belges2 ,gand1 #aiji4 #gj ,report of the ,commissioner of ,corporations on the ,lumber ,industry1 ,part ,i1 pp4 #bad-baf4 #ga ,king1 op4 cit41 p4 #aeh4 #gb ,thirteenth ,census1 ,vol4 ,i1 p4 #abie4 #gc ,hobson1 ,the ,evolution of ,modern ,capitalism1 p4 #d2 ,london1 #aijg4 #gd ,harper's ,monthly ,magazine1 ,jan41 #aiaj4 #ge ,watkins1 ,the ,growth of ,large ,fortunes1 p4 #ge2 ,n4 ,y41 #aijg4 #gf ,idem1 p4 #ic4 #gg ,youngman1 ,the ,economic ,causes of ,great ,fortunes1 p4 #de2 ,n4 ,y41 #aiji4 #gh ,howe1 op4 cit41 pp4 #abe1 #abf4 #gi ,cf4 ,commons1 ,the ,distribution of ,wealth1 pp4 #beb1 #beg2 ,n4 ,y41 #ahic4 #hj ,report of the ,commissioner of ,corporations on the ,steel ,industry1 ,part ,i1 p4 #cad4 #ha ,summary of ,report of the ,commissioner of ,corporations on the ,lumber ,industry1 pp4 #c-h4 #hb ,from articles in ,the ,single ,tax ,review1 vol4 #i1 nos4 #e1 #f4 #hc ,in a growing city1 an advantageous site will command a price more than in proportion to its present rent1 because it is expected that the rent will increase still further as the years go on4 ,taussig1 ,principles of ,economics1 ,,ii1 #ih2 ,n4 ,y41 #aiaa4 ,,chapter ,,viii ,,methods ,,of ,,reforming ,,our ,,land ,,system ,in economic and social discussion the word reform is commonly opposed to the word revolution4 ,it implies modification rather than abolition1 gradual rather than violent change4 ,hence reforms of the system of land tenure do not include such radical proposals as those of land nationalisation or the ,single ,tax4 ,on the other hand1 some extension of ,state ownership of land1 and some increase in the proportion of taxes imposed upon land1 may quite properly be placed under the head of reform1 inasmuch as they are changes in rather than a destruction of the existing system4 ,in general1 the reform measures needed are such as will meet the defects described in the last chapter2 namely1 monopoly1 excessive gains1 and exclusion from the land4 ,obviously they can be provided only by legislation2 and they may all be included under two heads1 ownership and taxation4 ,by far the greater part of the more valuable lands of the country are no longer under the ownership of the ,state4 ,urban land is practically all in the hands of private proprietors4 ,while many millions of acres of land suitable for agriculture are still under public ownership1 almost all of this area requires a considerable outlay for irrigation1 clearing1 and draining before it can become productive4 ,forty years ago1 three-fourths of the timber now standing was public property2 at present about four-fifths of it is owned by private persons or corporations4#hd ,the bulk of our mineral deposits1 coal1 copper1 gold1 silver1 etc41 have likewise fallen under private ownership1 with the exception of those of ,alaska4 ,the undeveloped water power remaining under government ownership has been roughly estimated at fourteen million horse power in the national forests1 and considerably less than that amount in other parts of the public domain4#he ,this is a gratifying proportion of the whole supply1 developed and undeveloped1 of this national resource1 which is said to be somewhere between #bg and #fj millions horse power4#hf ,only about seven million horse power has yet been developed1 almost all of which is privately owned4 ,the ,leasing ,system ,in many countries of ,europe it has long been the policy of governments to retain ownership of all lands containing timber1 minerals1 oil1 natural gas1 phosphate1 and water power4 ,the products of these lands are extracted and put upon the market through a leasing system4 ,that is2 the user of the land pays to the ,state a rental according to the amount and quality of raw material which he takes from the storehouse of nature4 ,theoretically1 the ,state could sell such lands at prices that would bring in as much revenue as does the leasing system2 practically1 this result has never been attained4 ,the principal advantages of the leasing arrangement are3 to prevent the premature destruction of forests1 the private monopolisation of limited natural resources 7which has happened in the case of the anthracite coal fields of ,pennsylvania7 and the private acquisition of exceptionally valuable land at ridiculously low prices2 and to enable the ,state to secure just treatment for the consumer and the labourer by stipulating that the former shall obtain the product at fair prices1 and that the latter shall receive fair wages4 ,this example should be followed by the ,united ,states4 ,all timber1 mineral1 gas1 oil1 and water power lands which have not been alienated to private persons should remain under government ownership1 and be brought into use through a leasing arrangement which would enable the private operators to obtain the rates of profit and interest which are ordinarily yielded by enterprises subject to the same degree of risk4 ,happily this policy now seems likely to be adopted4 ,in #aiac a law was passed by the ,united ,states providing for the operation of the coal mines of ,alaska on leases4 ,the amount that can be leased by any person or corporation is limited to #befj acres1 and the penalty for attempting to monopolise the product is forfeiture of tenure4 ,the ,secretary of the ,interior has urged a similar arrangement for the development and extraction of water power1 coal1 oil1 gas1 phosphate1 sodium1 and potassium on the public domain of ,continental ,united ,states1 and his recommendation will probably be adopted by ,congress4 ,thus the rent of these lands will go to the whole people instead of to a comparatively small number of individuals1 monopoly of the products will be made impossible1 and our remaining public resources will be protected from rapid and ruinous exploitation4 ,to the objection that capitalists will not invest their money in nor carry on extractive enterprises on a leasing basis1 the sufficient answer is that they are doing it now4 ,in #aiji1 #bd4e per cent4 of all the lands producing minerals1 precious metals1 and stone2 #id4f per cent4 of the lands producing petroleum and gas2 and #fa4b per cent4 of the two groups of lands combined1 were operated under leases from private owners or from the government4#hg ,if the rental or royalty demanded is not unreasonably high capitalists will be quite as willing to produce raw materials of these kinds from leased land as they are to manufacture or sell goods in a rented building4 ,not the leasing system1 but the terms of the particular lease are the important consideration4 ,public grazing lands should remain government property until such time as they become available for agriculture4 ,cattle owners could lease the land from the ,state on equitable terms1 and receive ample protection for money invested in improvements4 ,public ,agricultural ,lands ,the leasing system cannot well be applied to agricultural lands4 ,in order that they may be continuously improved and protected against deterioration1 they must be owned by the cultivators4 ,the temptation to wear out a piece of land quickly1 and then move to another piece1 and all the other obstacles that stand in the way of the ,single ,tax as applied to agricultural land1 show that the government cannot with advantage assume the function of landlord in this domain4 ,in the great majority of cases the ,state would do better to sell the land in small parcels to genuine settlers4 ,there are1 indeed1 many situations1 especially in connection with government projects of irrigation1 clearing1 and drainage1 in which the leasing arrangement could be adopted temporarily4 ,it should not be continued longer than is necessary to enable the tenants to become owners4 ,with this end in view the ,state should make loans to cultivators at moderate rates of interest1 as is done in ,new ,zealand and ,australia4 ,whether the ,state ought to purchase undeveloped land from private owners in order to sell it to settlers1 may well be doubted4 ,the only lands to which such a scheme would be at all applicable are large estates which are held out of use by their proprietors4 ,even here the transfer of the land to cultivators could be accomplished indirectly1 through an extra heavy tax4 ,this method has been adopted with success by ,australia and ,new ,zealand4 ,the only other action by the ,state that seems necessary or wise in order to place settlers upon privately owned agricultural land1 is the establishment of a comprehensive system of rural credits4 ,the need of cheaper food products1 and the desirability of checking the abnormal growth of our urban populations1 are powerful additional reasons for the adoption of this policy4 ,the ,hollis ,rural ,credits ,bill recently enacted into law by ,congress goes a considerable way toward meeting these needs4 ,public ,ownership of ,urban ,land ,no city should part with the ownership of any land that it now possesses4 ,since capitalists are willing to erect costly buildings on sites leased from private owners1 there is no good reason why any one should refuse to put up or purchase any sort of structure on land owned by the municipality4 ,the situation differs from that presented by agricultural land2 for the value of the land can easily be distinguished from that of improvements1 the owner of the latter can sell them even if he is not the owner of the land1 and he cannot be deprived of them without full compensation4 ,while the lessee paid his annual rent1 his control of the land would be as complete and certain as that of the landowner who continues to pay his taxes4 ,on the other hand1 the leaseholder could not permit or cause the land to deteriorate if he would2 for the nature of the land renders this impossible4 ,finally1 the official activities involved in the collection of the rent and the periodical revaluation of the land1 would not differ essentially from those now required to make assessments and gather taxes4 ,the benefits of this system would be great and manifest4 ,persons who were unable to own a home because of their inability to purchase land1 could get secure possession of the necessary land through a lease from the city4 ,instead of spending all their lives in rented houses1 thousands upon thousands of families could become the owners and occupiers of homes4 ,the greater the amount of land thus owned and leased by the city1 the less would be the power of private owners to hold land for exorbitant prices4 ,competition with the city would compel them to sell the land at its revenue-producing value instead of at its speculative value4 ,finally1 the city would obtain the benefit of every increase in the value of its land by means of periodical revaluation1 and periodical readjustment of rent4 ,unfortunately the amount of municipal land available for such an arrangement in our ,american cities is negligible4 ,if they are to establish the system they must first purchase the land from private owners4 ,undoubtedly this ought to be done by all large cities in which the housing problem has become acute1 and the value of land is constantly rising4 ,this policy has been adopted with happy results by many of the municipalities of ,france and ,germany4#hh ,at the state election of #aiae the voters of ,massachusetts adopted by an overwhelming majority a constitutional amendment authorising the cities of the commonwealth to acquire land for prospective home builders4 ,in ,savannah1 ,georgia1 no extension of the municipal limits is made until the land to be embraced has passed into the ownership of the city4 ,another method is to refrain from opening a new street in a suburban district until the city has become the proprietor of the abutting land4 ,whatever be the particular means adopted1 the objects of municipal purchase and ownership of land are definite and obvious3 to check the congestion of population in the great urban centres1 to provide homes for the homeless1 and to secure for the whole community the socially occasioned increases in land values4 ,indeed1 it is probable that no comprehensive scheme of housing reform can be realised without a considerable amount of land purchase by the municipalities4 ,cities must be in a position to provide sites for those home builders who cannot obtain land on fair conditions from private proprietors4#hi ,turning now from the direct method of public ownership to the indirect method of reform through taxation1 we reject the thoroughgoing proposals of the ,single ,taxers4 ,to appropriate all economic rent for the public treasury would be to transfer all the value of land without compensation from the private owner to the ,state4 ,for example3 a piece of land that brought to the owner an annual revenue of one hundred dollars would be taxed exactly that amount2 if the prevailing rate of interest were five per cent4 the proprietor would be deprived of wealth to the amount of two thousand dollars2 for the value of all productive goods is determined by the revenue that they yield1 and benefits the person who receives the revenue4 ,thus the ,state would become the beneficiary and the virtual owner of the land4 ,inasmuch as we do not admit that the so-called social creation of land values gives the ,state a moral right to these values1 we must regard the complete appropriation of economic rent through taxation as an act of pure and simple confiscation4#ij ,appropriating ,future ,increases of ,land ,value ,let us examine1 then1 the milder suggestion of ,john ,stuart ,mill1 that the ,state should impose a tax upon land sufficient to absorb all future increases in its value4#ia ,this scheme is commonly known as the appropriation of future unearned increment4 ,either in whole or in part it is at least plausible1 and is to-day within the range of practical discussion4 ,it is expected to obtain for the whole community all future increases in land values1 and to wipe out the speculative1 as distinguished from the revenue-producing value of land4 ,consequently it would make land cheaper and more accessible than would be the case if the present system of land taxation were continued4 ,before discussing its moral character1 let us see briefly whether the ends that it seeks may properly be sought by the method of taxation4 ,for these ends are mainly social rather than fiscal4 ,to use the taxing power for a social purpose is neither unusual nor unreasonable4 ,all governments1 says ,professor ,seligman1 have allowed social considerations in the wider sense to influence their revenue policy4 ,the whole system of productive duties has been framed not merely with reference to revenue considerations1 but in order to produce results which should directly affect social and national prosperity4 ,taxes on luxuries have often been mere sumptuary laws designed as much to check consumption as to yield revenue4 ,excise taxes have as frequently been levied from a wide social1 as from a narrow fiscal1 standpoint4 ,from the very beginning of all tax systems these social reasons have often been present4#ib ,our ,federal taxes on imports1 on intoxicating liquors1 on oleo-margarine1 and on white phosphorus matches1 and many of the license taxes in our municipalities1 as on pedlars1 saloon keepers1 and dog owners1 are in large part intended to meet social as well as fiscal ends4 ,they are in the interest of domestic production1 public health1 and public safety4 ,the reasonableness of effecting social reforms through taxation cannot be seriously questioned4 ,while the maintenance of government is the primary object of taxation1 its ultimate end1 the ultimate end of government itself1 is the welfare of the people4 ,now if the public welfare can be promoted by certain social changes1 and if these in turn can be effected through taxation1 this use of the taxing power will be quite as normal and legitimate as though it were employed for the upkeep of government4 ,hence the morality of taxing land for purposes of social reform will depend entirely upon the nature of the particular tax that is imposed4 ,some ,objections to the ,increment ,tax ,the tax that we are now considering can be condemned as unjust on only two possible grounds3 first1 that it would be injurious to society2 and1 second1 that it would wrong the private landowner4 ,if it were fairly adjusted and efficiently administered it could not prove harmful to the community4 ,in the first place1 landowners could not shift the tax to the consumer4 ,all the authorities on the subject admit that taxes on land stay where they are put1 and are paid by those upon whom they are levied in the first instance4#ic ,the only way in which the owners of a commodity can shift a tax to the users or consumers of it1 is by limiting the supply until the price rises sufficiently to cover the tax4 ,by the simple device of refusing to erect more buildings until those in existence have become scarce enough to command an increase in rent equivalent to the new tax1 the actual and prospective owners of buildings can pass the tax on to the tenants thereof4 ,by refusing to put their money into1 say1 shoe factories1 investors can limit the supply of shoes until any new tax on this commodity is shifted upon the wearers of shoes in the form of higher prices4 ,until these rises take place in the rent of buildings and the price of shoes1 investors will put their money into enterprises which are not burdened with equivalent taxes4 ,but nothing of this sort can follow the imposition of a new tax upon land4 ,the supply of land is fixed1 and cannot be affected by any action of landowners or would-be landowners4 ,the users of land and the consumers of its products are at present paying all that competition can compel them to pay4 ,they would not pay more merely because they were requested to do so by landowners who were labouring under the burden of a new tax4 ,if all landowners were to carry out an agreement to refrain from producing1 and to withhold their land from others until rents and prices had gone up sufficiently to offset the tax1 they could1 indeed1 shift the latter to the renters of land and the consumers of its products4 ,such a monopoly1 however1 is not within the range of practical achievement4 ,in its absence1 individual landowners are not likely to withhold land nor to discontinue production in sufficient numbers to raise rents or prices4 ,indeed1 the tendency will be all the other way2 for all landowners1 including the proprietors of land now vacant1 will be anxious to put their land to the best use in order to have the means of paying the tax4 ,owing to this increased production1 and the increased willingness to sell and let land1 rents and prices must fall4 ,it is axiomatic that new taxes upon land always make it cheaper than it would have been otherwise1 and are beneficial to the community as against the present owners4 ,in the second place1 the tax in question could not injure the community on account of discouraging investment in land4 ,once men could no longer hope to sell land at an advance in price1 they would not seek it to the extent that they now do as a field of investment4 ,for the same reason many of the present owners would sell their holdings sooner than they would have sold them if the tax had not been levied4 ,from the viewpoint of the public the outcome of this situation would be wholly good4 ,land would be cheaper and more easy of access to all who desired to buy or use it for the sake of production1 rather than for the sake of speculation4 ,investments in land which have as their main object a rise in value are an injury rather than a benefit to the community2 for they do not increase the products of land1 while they do advance its price1 thereby keeping it out of use4 ,hence the ,state should discourage instead of encouraging mere speculators in land4 ,whether it is or is not bought and sold1 the supply of land remains the same4 ,the supreme interest of the community is that it should be put to use1 and made to supply the wants of the people4 ,consequently the only land investments that help the community are those that tend to make the land productive4 ,under a tax on future increases in value1 such investments would increase for the simple reason that land would be cheaper than it would have been without the tax4 ,men who desired land for the sake of its rent or its product would continue as now to pay such prices for it as would enable them to obtain the prevailing rate of interest on their investment after all charges1 including taxes1 had been paid4 ,men who wanted to rent land would continue as now to get it at a rental that would give them the usual return for their capital and labour4 ,so much for the effect of the tax upon the community4 ,would it not1 however1 be unjust to the landowners8 ,does not private ownership of its very nature demand that increases in the value of the property should go to the owners thereof8 ,res fructificat domino3 a thing fructifies to its owner2 and value-increases may be classed as a kind of fruit4 ,in the first place1 this formula was originally a dictum of the civil law merely1 the law of the ,roman ,empire4 ,it was a legal rather than an ethical maxim4 ,whatever validity it has in morals must be established on moral grounds1 by moral arguments4 ,it cannot forthwith be assumed to be morally sound on the mere authority of legal usage4 ,in the second place1 it was for a long time applied only to natural products1 to the grain grown in a field1 to the offspring of domestic animals4 ,it simply enunciated the policy of the law to defend the owner of the land in his claim to such fruits1 as against any outsider who should attempt to set up an adverse title through mere appropriation or possession4 ,thus far1 the formula was evidently in conformity with reason and justice4 ,later on it was extended1 both by lawyers and moralists1 to cover commercial fruits1 such as1 rent from lands and houses1 and interest from loans and investments4 ,its validity in this field will be examined in connection with the justification of interest4 ,more recently the maxim has received the still wider application which we are now considering4 ,obviously increases in value are quite a different thing from the concrete fruit of the land1 its natural product4 ,a right to the latter does not necessarily and forthwith imply a right to the former4 ,in the third place1 the formula in question is not a self evident1 fundamental principle4 ,it is merely a summary conclusion drawn from the consideration of the facts and principles of social and industrial life4 ,consequently its validity as applied to any particular situation will depend on the correctness of these premises1 and on the soundness of the process by which it has been deduced4 ,the increment tax is sometimes opposed on the ground that it is new1 in fact1 revolutionary4 ,in some degree the charge is true1 but the conditions which the proposal is intended to meet are likewise of recent origin4 ,the case for this legislation rests mainly on the fact that1 for the first time in the world's history1 land values everywhere show an unmistakable tendency to advance indefinitely4 ,this means that the landowning minority will be in a position to reap unbought and continuous benefits at the expense of the landless majority4 ,this new fact1 with its very important significance for human welfare1 may well require a new limitation on the right of property in land4 ,it is also objected that to deprive men of the opportunity of profiting by changes in the value of their land would be an unfair discrimination against one class of proprietors4 ,but there are good reasons for making the distinction4 ,except in the case of monopoly1 increases in the value of goods other than land are almost always due to expenditures of labour or money upon the goods themselves4 ,the value increases that can be specifically traced to external and social influences are intermittent1 uncertain1 and temporary4 ,houses1 furniture1 machinery1 and every other important category of artificial goods are perishable1 and decline steadily in value4 ,land1 however1 is substantially imperishable1 becomes steadily scarcer relatively to the demand1 and its value-increases are on the whole constant1 certain1 and permanent4 ,moreover1 it is the settled policy of most enlightened governments to appropriate or to prevent all notable increases in the value of monopolistic goods1 either through special taxation or through regulation of prices and charges4 ,taking the increment values of land is1 therefore1 not so discriminative as it appears at first glance4#id ,another objection is that the proposal would violate the canons of just taxation1 since it would impose a specially heavy burden upon one form of property4 ,the general doctrine of justice in taxation which is held by substantially all economists to-day1 and which has been taught by ,catholic moralists for centuries1 is that known as the faculty theory4#ie ,men should be taxed in proportion to their ability to pay1 not in accordance with the benefits that they may be assumed to receive from the ,state4 ,and it is universally recognised that the proper measure of ability is not a man's total possessions1 productive and unproductive1 but his income1 his annual revenue4 ,now1 the increment tax does seem to violate the rule of taxation according to ability1 inasmuch as it would take all of one species of revenue1 while all other incomes and properties pay only a certain percentage4 ,all the adherents of the faculty theory maintain1 however1 that it is subject to certain modifications4 ,incomes from interest1 rent1 and socially occasioned increases in the value of property should be taxed at a higher rate than incomes that represent expenditures of labour2 for to give up a certain per cent4 of the former involves less sacrifice than to give up the same per cent4 of the latter4 ,therefore1 increments of land-value may be fairly taxed at a higher rate than salaries1 personal property1 or even rent and interest4 ,when1 however1 the law absorbs the whole of the value increments1 it seems to be something more than a tax4 ,the essential nature of a tax is to take only a portion of the particular class of income or property upon which it is imposed4 ,the nearest approach to the plan of taking all future increases in land value is to be found in the special assessments that are levied in many ,american cities4 ,thus1 the owners of urban lots are frequently compelled to defray the entire cost of street improvements on the theory that their land is thereby and to that extent increased in value4 ,in such cases the contribution is levied not on the basis of the faculty theory1 but on that of the benefit theory2 that is1 the owners are required to pay in proportion to benefits received4 ,all adherents of the faculty theory admit that the benefit theory is justifiably applied in situations of this kind4 ,it might be argued that the latter theory can also be fairly applied to increments of land value that are to arise in the future4 ,in both cases the owner returns to the ,state the equivalent of benefits which have cost him nothing4 ,there is1 however1 a difference4 ,in the former case the value increases are specifically due to expenditures made by the ,state1 while in the latter they are indirectly brought about by the general activities of the community4 ,we do not admit with the ,single ,taxers that this social production of value increments creates a right thereto on the part of either the community or the civil body2 but even if we did we should be compelled to admit that the two situations are not exactly parallel2 for the social production of increases in the value of land involves no special expenditure of labour or money4 ,hence it is very questionable whether the appropriation of the whole of the future value increments can be harmonised with the received conceptions and applications of the canons of taxation4 ,the ,morality of the ,proposal ,however1 it is neither necessary nor desirable to justify the proposal on the mere ground of taxation4 ,only in form and administration is it a tax2 primarily and in essence it is a method of distribution4 ,it resembles the action by which the ,state takes possession of a newly discovered territory by the title of first occupancy4 ,the future increases of land value may be regarded as a sort of no man's property which the ,state appropriates for the benefit of the community4 ,and the morality of this proceeding must be determined by the same criterion that is applied to every other method or rule of distribution2 namely1 social and individual consequences4 ,no principle1 title1 or practice of ownership1 nor any canon of taxation1 has intrinsic or metaphysical value4 ,all are to be evaluated with reference to human welfare4 ,since the right of property is not an end in itself1 but only a means of human welfare1 its just prerogatives and limitations are determined by their conduciveness to the welfare of human beings4 ,by human welfare is meant not merely the good of society as a whole1 but the good of all individuals and classes of individuals4 ,for society is made up of individuals1 all of whom are of equal worth and importance1 and have equal claims to consideration in the matter of livelihood1 material goods1 and property4 ,in general1 then1 any method of distribution1 any modification of property rights1 any form of taxation1 is morally lawful which promotes the interests of the whole community1 without causing undue inconvenience to any individual4 ,whether a given rule of ownership or method of distribution which is evidently conducive to the public good is1 nevertheless1 unduly severe on a certain class of individuals1 is a question that is not always easily answered4 ,some of the methods and practices appearing in history were clearly fair and just1 others clearly unfair and unjust1 and still others of doubtful morality4 ,frequently the ,state has compelled private persons to give up their land at a lower price than they paid for it2 in more than one country freebooters and kingly favourites robbed the people of the land1 yet their heirs and successors are recognised by both moralists and statesmen as the legitimate owners of that land2 in ,ireland stubborn landlords are to-day compelled by the ,british government to sell their holdings to the tenants at an appraised valuation2 in many countries men may become owners of their neighbours' lands by the title of prescription1 without the payment of a cent of compensation4 ,all these practices and titles inflict considerable hardship upon individuals1 but most of them are held to be justified on grounds of social welfare4 ,now the public appropriation of all future increments of land value would evidently be beneficial to the community as a whole4 ,it would enable all the people to profit by gains that now go to a minority1 and it would enable the landless majority to acquire land more easily and more cheaply4 ,we have in mind1 of course1 only those value increases that are not due to improvements in or on the land1 and we assume that these could be distinguished in practice from the increments of value that represent improvements4 ,would the measure in question inflict undue hardship upon individuals8 ,here we must make a distinction between those persons who own land at the time that1 and those who buy land after1 the law is enacted4 ,the only inconvenience falling upon the latter class would be deprivation of the power to obtain future increases in value4 ,the law would not cause the value of the land to decline below their purchase price4 ,other forces might1 indeed1 bring about such a result2 but1 as a rule1 such depreciation would be relatively insignificant1 for the simple reason that it would already have been discounted in the reduction of value which followed the law at the outset4 ,the very knowledge that they could not hope to profit by future increases in the value of the land would impel purchasers to lower their price accordingly4 ,while taking away the possibility of gaining1 the law enables the buyers to take the ordinary precautions against losing4 ,therefore1 it does not1 as sometimes objected1 lessen the so called gambler's chances4 ,on the other hand1 the tax does not deprive the owners of any value that they may add to the land through the expenditure of labour or money1 nor in any way discourage productive effort4 ,now it is1 as a rule1 better for individuals as well as for society that men's incomes should represent labour1 expenditure1 and saving instead of being the result of windfalls1 or other fortuitous and conjunctural circumstances4 ,and the power to take future value increments is not an intrinsically essential element of private property in land4 ,like every other condition of ownership1 its morality is determined by its effects upon human welfare4 ,but we have seen in the last paragraph that human welfare in the sense of the social good is better promoted by a system of landownership which does not include this element2 and we have just shown that such a system causes no undue hardship to the individual who buys land after its establishment4 ,such is the answer to the contention1 noticed a few pages back1 that the landowner has a right to future increments of value because they are a kind of fruit of his property4 ,it is more reasonable that he should not enjoy this particular and peculiar fruit4 ,were the increment tax introduced into a new community before any one had purchased land1 it would clearly be a fair and valid limitation on the right of ownership4 ,those who should become owners after the regulation went into effect in an old community would be in exactly the same moral and economic position4 ,finally1 there exists some kind of legal precedent for the proposal in the present policy of efficient governments with regard to the only important increases that occur in the value of goods other than land2 namely1 increases due to the possession of monopoly power4 ,by various devices these are either prevented or appropriated by the ,state4 ,those persons who are landowners when the increment tax goes into effect are in a very different situation from those that we have just been considering4 ,many of them would undoubtedly suffer injury through the operation of the measure1 inasmuch as their land would reach and maintain a level of value below the price that they had paid for it4 ,the immediate effect of the increment tax would be a decline in the value of all land1 caused by men's increased desire to sell and decreased desire to buy4 ,in all growing communities a part of the present value of land is speculative2 that is1 it is due to demand for the land by persons who want it mainly to sell at an expected rise1 and also to the disinclination of present owners to sell until this expectation is realised4 ,the practical result of the attitude of these two classes of persons is that the demand for1 and therefore the value of land is considerably enhanced4 ,let a law be enacted depriving them of all hope of securing the anticipated increases in value1 and the one group will cease to buy1 while the other will hasten to sell1 thus causing a decline in demand relatively to supply1 and therefore a decline in value and price4 ,all persons who had paid more for their land than the value which it came to have as a result of the increment tax law1 would lose the difference4 ,for1 no matter how much the land might rise in value subsequently1 the increase would all be taken by the ,state4 ,and all owners of vacant land the value of which after the law was passed did not remain sufficiently high to provide accumulated interest on the purchase price1 would also lose accordingly4 ,to be sure1 both these kinds of losses would exist even if the law should cause no decline in the value of land1 but they would not be so great either in number or in volume4 ,landowners who should suffer either of these sorts of losses would have a valid moral claim against the ,state for compensation4 ,through its silence on the subject of increment-tax legislation1 the ,state virtually promised them at the time of their purchases that it would not thus interfere with the ordinary course of values4 ,had it given any intimation that it would enact such a law at a future time1 these persons would not have paid as much for their land as they actually did pay4 ,when the ,state passes the law1 it violates its implicit promise1 and consequently is under obligation to make good the resulting losses4 ,is it not obliged to go further1 and pay for the positive gains that many of the owners would have reaped in the absence of the law8 ,for example3 a piece of land is worth one thousand dollars the day after the tax goes into effect1 and that was exactly the price paid for it by the present owner2 another piece has the same value1 but was bought by the present owner for eight hundred dollars4 ,while neither of these men suffer any loss on their investments1 they are deprived of possible gains2 for had the law not been enacted their holdings would be worth1 say1 eleven hundred dollars4 ,nevertheless1 they are no worse off in this respect than those persons who buy land after the increment tax goes into effect1 and have no greater claim to compensation for abolished opportunities of positive gain4 ,as we have seen above1 the certain advantages of the measure to the community1 the doubtful advantages to individuals of profiting by changes in price which do not represent labour1 expense1 or saving1 show that the owners have no strict right to compensation4 ,and it is still clearer that no landowner has a valid claim on account of value increases that would have taken place subsequent to the time that the measure was enacted4 ,there is no way by which owners who would have held their land long enough to profit by these increments can be distinguished from owners who would not have availed themselves of this conjectural opportunity1 nor any method by which the amount of such gains can be determined4 ,on the other hand1 it might be objected that1 in reimbursing all owners who suffer the positive losses above described1 the ,state is unduly generous2 for if the law had not been enacted many of the reimbursed persons would have sold their holdings at a price insufficient to cover their losses4 ,but these cannot be distinguished from those who would have sold at a remunerative price4 ,hence the ,state must compensate all or none4 ,the former alternative is not only the more just all round1 but in the long run the more expedient4 ,in view of the social benefits of the increment tax1 especially the removal of many of the inequities of the present taxing system1 the ,state might sometimes be justified in making good only a part of the losses that we have been discussing4 ,but this could probably occur only for administrative reasons1 such as the difficulty of determining the persons entitled to and the amounts of compensation4 ,it would not be justified merely to enable the ,state to profit at the expense of individuals4 ,and1 in any case1 there seems to be no good reason why the unpaid losses should amount to more than a small fraction of the whole4 ,in the foregoing pages we have been considering a law which would from the beginning of its operation take all the future increments of land value4 ,there is1 however1 no likelihood that any such measure will soon be enacted in any country1 least of all1 in the ,united ,states4 ,what we shall probably see is the spread of legislation designed to take a part1 and a gradual growing part1 of value increases1 after the example of ,germany and ,great ,britain4 ,let us glance at the laws in force in these two countries4 ,the ,german and ,british ,increment ,taxes ,the first increment tax 7,werthzuwachssteuer7 was established in the year #ahih in the ,german colony of ,kiautschou1 ,china4 ,in #aijd the principle of the tax was adopted by ,frankfort-am-,main1 and in #aije by ,cologne4 ,by ,april1 #aiaj1 it had already been enacted in #deg cities and towns of ,germany1 some twenty of which had a population of more than #ajj1jjj each1 in #feb communes1 several districts1 one principality1 and one grand duchy4 ,in #aiaa it was inserted in the imperial fiscal system1 and thus extended over the whole ,german ,empire4 ,while these laws are all alike in certain essentials1 they vary greatly in details4 ,they agree in taking only a per cent4 of the value increases1 and in imposing a higher rate on the more rapid increases4 ,the rates of the imperial law vary from ten per cent4 on increases of ten per cent4 or less to thirty per cent4 on increases of #bij per cent4 or over4 ,in ,dortmund the scale progresses from one to #ab-a_/b per cent4 ,inasmuch as the highest rate in the imperial law is #cj per cent41 and in any municipal law 7,cologne and ,frankfort7 #be per cent42 inasmuch as all the laws allow deductions from the tax to cover the interest that was not obtained while the land was unproductive2 and inasmuch as only those increases are taxed which are measured from the value that the land had when it came into the possession of the present owner1--it is clear that landowners are not obliged to undergo any positive loss1 and that they are permitted to retain the lion's share of the unearned increment4#if ,it is to be noted that most of the ,german laws are retroactive1 since they apply not merely to future value increases1 but to some of those that occurred before the law was enacted4 ,thus1 the ,hamburg ordinance measures the increases from the last sale1 no matter how long ago that transaction took place4 ,the imperial law uses the same starting point1 except in cases where the last sale occurred before #ahhe4 ,accordingly1 a man who had in #ahhj paid #bejj marks for a piece of land which in #ahhe was worth only #bjjj marks1 and who sold it for #cjjj marks after the law went into effect1 would pay the increment tax on #ajjj marks1--unless he could prove that his purchase price was #bejj marks4 ,in all such cases the burden of proof is on the owner to show that the value of the land in #ahhe was lower than when he had bought it at the earlier date4 ,obviously this retroactive feature of the ,german legislation inflicts no wrong on the owner1 since it does not touch value increases that he has paid for4 ,indeed1 the value of the land when it came into the present owner's possession seems to be a fairer and more easily ascertained basis from which to reckon increases than any date subsequent to the enactment of the law4 ,on the one hand1 persons whose lands had fallen in value during their ownership would be automatically excluded from the operation of the law until such time as the acquisition value was again reached2 on the other hand1 those owners whose lands had increased in value before the law went into effect would be taxed as well as those whose gains began after that event2 thus the law would reach a greater proportion of the existing beneficiaries of unearned increment4 ,moreover1 it would bring in a larger amount of revenue4 ,the ,british law formed a part of the famous ,lloyd-,george budget of #aiji4 ,it taxes only those increments that occur after its enactment4 ,these are subject to a tax of twenty per cent4 on the occasion of the next transfer of the land1 by sale1 bequest1 or otherwise4#ig ,in some cases this arrangement will undoubtedly cause hardship4 ,for example3 if land which was bought for #a1jjj pounds in #aijj had fallen to #hjj pounds in #aiji1 and were sold for #a1jjj pounds in #aiae1 the owner would have to pay a tax of twenty per cent4 on #bjj pounds4 ,this would mean a net loss of forty pounds1 to say nothing of the loss of interest in case the land was unproductive4 ,it would seem that some compensation ought to be given here2 yet the rarity of such instances1 the administrative difficulties1 and the general advantages of this sort of legislation quite conceivably might forbid the conclusion that the owner was made to suffer certain injustice4 ,the compensating social advantages of the increment tax as well as of other special taxes on land1 will receive adequate discussion presently4 ,transferring ,other ,taxes to ,land ,another taxation plan for reducing the evils of our land system consists in the imposition of special taxes on the present value of land4 ,as a rule1 these imply1 not an addition to the total tax levy1 but a transfer of taxes from other forms of property4 ,the usual practice is to begin by exempting either partly or wholly buildings and other kinds of improvements from taxation1 and then to apply the same measure to certain kinds of personal property4 ,in most cases the transfer of such taxes to land is gradual1 extending over a period of five1 ten1 or fifteen years4 ,the plan is in operation in ,canada and ,australasia1 and to a slight extent in the ,united ,states4 ,it has received its greatest development in the western provinces of ,canada2 namely1 ,british ,columbia1 ,alberta1 ,saskatchewan1 and ,manitoba4 ,the cities of ,edmonton1 ,medicine ,hat1 and ,red ,deer2 ,vancouver1 ,victoria1 and thirteen others of the thirty-three cities of ,british ,columbia2 all the towns of ,alberta except two2 all but one of the villages of ,alberta1 and one-fourth of those in ,saskatchewan2 all the rural municipalities and local improvements districts in ,alberta1 ,manitoba1 and ,saskatchewan1 and #bd of the #bh in ,british ,columbia1--exempt improvements entirely from taxation4 ,the three cities in ,alberta which retain some taxes on improvements2 all the cities and towns and three-fourths of the villages in ,saskatchewan2 the four largest cities in ,manitoba2 and a considerable number of the municipalities in ,ontario 7by the device of illegal under-assessment in this instance71--tax improvements at less than full value1 in some cases as low as fifteen per cent4 ,land is invariably assessed at its full value4 ,it is to be observed that these special land taxes provide only local revenues2 they do not contribute anything to the maintenance of either the provincial or the dominion governments4 ,the reason why the local jurisdictions have adopted these taxes so much more extensively in ,alberta than in the other provinces is to be found in a provincial law enacted in #aiab1 which requires all towns1 villages1 and rural areas to establish within seven years the practice of exempting from taxation personal property and buildings4 ,saskatchewan permits cities and towns to tax improvements up to sixty per cent4 of their value1 while ,british ,columbia and ,manitoba leave the matter entirely in the hands of the local authorities4 ,the provincial revenues are derived from many sources1 chiefly real estate1 personal property1 and incomes2 but ,british ,columbia1 ,saskatchewan1 and ,alberta levy a special tax on unimproved and only slightly improved rural land4 ,the rate of this wild lands tax is in ,british ,columbia four per cent41 and in the other two provinces one per cent4 ,some of the municipalities of ,british ,columbia and ,saskatchewan also impose a wild lands tax4 ,by a law passed in #aiac ,alberta levies a provincial tax of five per cent4 on the value increases of non-agricultural lands4 ,a movement for the reduction of the tax on buildings has developed considerable strength in the eastern provinces of ,ontario1 ,nova ,scotia1 and ,new ,brunswick4#ih ,new ,zealand and most of the states of ,australia have for several years levied special taxes on land1 consisting mainly of general rates on estates of moderate size1 and a progressive super tax on large estates4 ,the ,commonwealth of ,australia also imposes a tax of one penny in the pound on the value of land4 ,a considerable proportion of the cities and towns in both ,new ,zealand and ,australia derive practically all their revenues from land1 exempting improvements entirely4 ,in both countries1 however1 the bulk of the total revenue is obtained from other sources than land taxes4 ,in ,new ,zealand they yield less than thirteen per cent4 of the national receipts4#ii ,pittsburgh and ,scranton were required by a law enacted in #aiac to reduce the local tax rate on buildings at such a pace that in #aibe and thereafter it would be only one-half the highest rate on other forms of property4 ,everett1 ,wash41 and ,pueblo1 ,col41 within recent years adopted by popular vote more sweeping measures of the same character1 but the ,everett law has never gone into effect1 and the ,pueblo statute was repealed two years after it had been passed4 ,in many cities of the ,united ,states1 buildings are undervalued relatively to land by the informal and illegal action of assessors4 ,the most pronounced and best known instance of this kind is ,houston1 ,texas1 where in #aiad land was assessed at seventy per cent4 of its value and buildings at only twenty-five per cent4 ,in #aiae1 however1 the practice was forbidden by the courts as contrary to the ,texas constitution4 ,at more than one recent session of the ,new ,york legislature1 bills have been introduced providing for the gradual reduction of the tax on buildings in ,new ,york ,city to a basis of fifty per cent4 of their value4 ,while none of them has been passed1 the sentiment in favour of some such measure is probably increasing4 ,a similar movement of opinion is apparent in many other sections of the country4 ,on the whole1 the special land taxes of ,canada and ,australasia are not remarkably high4 ,they seem to be as low or lower than the average rates imposed on land1 as well as on other forms of general property1 in the ,united ,states4 ,in the provinces1 the special land taxes provide only a small portion of the total revenues2 in the cities and towns1 there are1 as a rule1 other sources of revenue as well as land1 and the expenses of municipal government are probably not as high as in this country4 ,hence the land taxes of ,canada have not reached an abnormally high level1 and are probably lower than most persons who have heard of them would be inclined to expect4 ,the chief exceptions to the foregoing statements are to be found in the wild lands tax of ,british ,columbia1 and in the land taxes of some of the towns 7not the cities7 of ,alberta4 ,a rate of four per cent4 on unimproved and slightly improved rural land is extraordinary in fiscal annals1 and is scarcely warranted by any received principle of taxation1 although it may possibly be justified by peculiar social and administrative conditions in the province of ,british ,columbia4 ,some of the smaller towns of ,alberta which adopted the land tax during the recent period of depression have been compelled to impose even higher rates1 the maximum being reached by ,castor in #aiab1 with a rate of #h-a_/b per cent4 ,as a natural consequence1 a large proportion of the land in this town was surrendered by its owners to the municipality4 ,while this amazing tax rate is probably temporary1 and is likely to be lowered after the return of the average conditions of prosperity1 it inflicts unfair hardship upon those owners whose circumstances are such that they must give up their land1 instead of awaiting the hoped for decline in the rate of taxation4 ,the ,morality of the ,plan ,the losses of various kinds that would result from the transfer of other taxes to land may be thus summarised4 ,land would depreciate in value by an amount equal to the capitalised tax4 ,for example2 if the rate of interest were five per cent41 an additional tax of one per cent4 would reduce land worth one hundred dollars an acre to eighty dollars4 ,this decline might1 indeed1 be partly1 wholly1 or more than offset by a simultaneous rise due to economic forces4 ,in any case1 however1 the land would be worth twenty dollars less than it would have been worth had the tax not been imposed4 ,for some owners this would mean a positive loss2 for others it would signify mere failure to gain4 ,the latter would happen in the case of all those owners who at any time after the imposition of the tax sold their land at as high a price as they had paid for it4 ,not all of the owners whose land was forced by the tax to a figure below their purchase price would suffer positive loss2 for the land might subsequently rise in value sufficiently to wipe out the unfavourable difference4 ,in this respect a special tax on the present value of land has a different effect from a tax that appropriates all the future value increases4 ,only those owners who actually sold their land below their purchase price could charge the former tax with inflicting upon them positive losses4 ,in the case of the land exemplified above1 the owner who sold at ninety dollars per acre could properly attribute to the tax a loss of ten dollars2 the owner who sold at eighty dollars would have a grievance amounting to twenty dollars2 and a loss would be suffered by any owner who sold for less than eighty dollars4 ,in the second place1 all owners of vacant land who sold at a price insufficient to provide for accumulated interest on the purchase price1 could justly hold the tax responsible1 so long as the deficiency did not exceed the value-depreciation caused by the tax4 ,thirdly1 all persons whose land had an unusually high value relatively to the value of their exempted property1 would suffer losses as taxpayers4 ,they would lose more through the heavier land taxes than they would gain through the lighter taxes1 or the absence of taxes1 on their other property4 ,to compensate all owners who underwent these three kinds of losses would be practically impossible4 ,the number of persons would be too large1 the difficulty of proving many of the claims would be too expensive1 and the compensation process would be too long drawn out1 since it would have to continue until the death of all persons who had owned land when the last instalment of the increased land taxes went into effect4 ,therefore1 the losses in question must be counterbalanced by other and indirect methods4 ,these will be found mainly in the following considerations3 the amount of the new taxes2 the gradual method of imposing them2 and their socially beneficial results4 ,amount of ,taxes ,practically ,transferable ,according to ,professor ,king's computations1 the total rent of land in the ,united ,states in #aiaj was #b1fgc1ijj1jjj1 while the total expenditures of national1 state1 county and city governments were #b1eia1hjj1jjj4ajj ,in his opinion 7p4 #afb7 the rent would have been barely sufficient to pay off the various governmental budgets as at present constituted1 and with the growing concentration of activities in the hands of the government1 it appears that rent will soon be a quantity far too small to meet the required changes4 ,with increasing pressure on our natural resources1 however1 it is probable that the percentage of the total income paid for rent will gradually increase and1 since this is true1 the lag behind the growing governmental expenses will be considerably less than would otherwise be the case4 ,a change in our fiscal system providing for the immediate derivation of all revenues from land taxes would1 therefore1 involve the confiscation of all rent1 and the destruction of all private land values4 ,land would be worth nothing to the owners when its entire annual return was taken by the ,state in the guise of taxes4 ,even if the process of imposing the new taxes on land were extended over a long term of years the same result would be reached in the end2 for whatever increase had taken place in the economic value of land during the process would in all probability have been neutralised by the increase in governmental expenditures4 ,it is evident1 therefore1 that the proposal to put all taxes on land must be rejected on grounds of both morals and expediency4 ,let us suppose that all national revenues continued1 as now1 to be raised from other sources than land1 and that all state1 county1 and city revenues remained as they are1 except those derived from the general property tax4 ,this would mean that all the following taxes would be unchanged3 all federal taxes1 the taxes on licenses of all kinds1 all taxes on business1 incomes1 and inheritances1 and all special property taxes4 ,if1 then1 the whole of the general property tax were concentrated on land2 that is1 if all the taxes on improvements and on all forms of personal property were legally shifted to land1--the entire revenue to be raised from land would in #aiab have amounted to #a1cdi1hda1jch4aja ,this is slightly more than one-half of ,professor ,king's estimate of the total rent for #aiaj1 which was #b1fgc1ijj1jjj4 ,but this figure equals four per cent4 of the land values of the country2 hence the concentration of the general property tax on land would mean a tax rate of two per cent4 on the full value of the land4 ,how much would this change increase the present rate of land taxes1 and decrease existing land values8 ,while no accurate and definite answer can be given to either of these questions1 certain approximations can be attempted which should be of considerable service4 ,in #aiab the average tax rate on the assessed valuation of all goods subject to the general property tax was 4#jaid1 or #ai4dj per thousand dollars4#ajb ,the assessed valuation of taxed real property and improvements 7land1 buildings1 and other improvements7 was nearly fifty-two billion dollars1 while the true value of the same property was nearly ninety-eight and one-half billions4#ajc ,consequently1 the actual tax rate of 4#jaid on the assessed valuation was exactly one per cent4 on the true value of real estate4 ,on the assumption that both land and improvements were undervalued to the same extent1 the land tax was one per cent4 of the full value of the land4 ,if now we take ,thomas ,g4 ,shearman's estimate1 that land values form sixty per cent4 of the total value of real estate1 we find that the taxes derived from land constituted only forty-four per cent4 of the total revenues raised by the general property tax4 ,to concentrate the whole of the general property tax on land1 by transferring thereto the taxes on improvements and on personal property1 would1 accordingly1 cause the land tax to be somewhat more than doubled4 ,it would be slightly above two per cent4 on the full value of the land4 ,this is the same estimate that we obtained above by a different process2 that is1 by comparing ,professor ,king's estimate of land value and rent with the total revenues derived from the general property tax4 ,however1 it is not improbable that sixty per cent4 is too low an estimate of the ratio of land values to entire real estate values4 ,in #aijj1 farm land and improvements1 exclusive of buildings1 formed #gh4f per cent4 of the value of real estate1 i4e41 land1 improvements1 and buildings4 ,in #aiaj1 the per cent4 was a little less than #hb4 ,now it is quite unlikely that the value of non-building improvements on farms amounted to the difference between sixty per cent4 and seventy-eight per cent4 in #aijj1 or between sixty per cent4 and eighty-two per cent4 in #aiaj4 ,hence the value of farm land is something more than sixty per cent4 of farm real estate4 ,on the other hand1 the value of factory land in #aijj formed only #da4e per cent4 of the total value of factory land and buildings1 while the value of city and town lots in five rural states varied from #cd to #fb per cent4 of this species of real estate4#ajd ,in ,greater ,new ,york land constitutes #fa per cent4 of real estate values4#aje ,owing to the lack of data1 the average ratio for all kinds of real estate for the whole country is impossible of determination4 ,if the estimate of seventy per cent4 be adopted1 which is probably the upper limit of the average proportion between land values and real estate values throughout the country1 the portion of the general property tax now paid by land amounts to about fifty-two per cent4 ,consequently the imposition of the whole general property tax on land would not quite double the present rate on land4 ,to the first of the two questions raised above the answer can be given with a fair amount of confidence that the transfer of improvement and personal property taxes to land would cause land taxes to be about twice what they are at present4 ,to the second question1 concerning the extent to which land values would fall in consequence of the heavier taxes1 the answer must be somewhat less definite4 ,the added land taxes would be about one-half the present general property taxes1 or #fge1jjj1jjj4 ,this is about one per cent4 the total land values of the country4 ,one per cent4 of land values capitalised at five per cent4 represents a depreciation of twenty per cent4 in the value of land2 capitalised at four per cent41 it represents a depreciation of twenty-five per cent4 ,for example2 if land worth one hundred dollars an acre returns to its owner a net income of five dollars annually1 the appropriation of one dollar by a new tax will leave a net revenue of only four dollars2 capitalised at the current rate of five per cent41 this represents only eighty dollars of land value1 or a depreciation of twenty per cent4 ,if the land has the same value of one hundred dollars1 and still yields only four dollars revenue1 a deduction of one dollar in new taxes will leave only three dollars net2 capitalised at the current rate of four per cent41 this represents only seventy-five dollars of land value1 or a depreciation of twenty-five per cent4 ,using the other method of calculation1 which estimated the present tax rate on the full value of land at one per cent41 we get exactly the same results2 namely1 the new tax is one per cent41 which is equivalent to a depreciation of twenty per cent4 or of twenty-five per cent41 according as we assume an interest rate of five per cent4 or of four per cent4 ,suppose1 however1 that the assessors do not undervalue land to the extent that we have been assuming2 suppose that the present rate of 4#jaid on assessed valuation is equivalent to1 not merely one per cent41 but one and one-half per cent4 of the full value of land4 ,in that hypothesis the additional tax would likewise be one and one-half per cent41 which capitalised at five per cent1 would represent a depreciation of thirty per cent41 and at four per cent4 a depreciation of thirty-seven and one-half per cent4 ,combining in one generalisation the various suppositions made in this paragraph1 we estimate the depreciation of land values resulting from the proposed tax transfer as somewhere between twenty and forty per cent4 ,we have considered two hypothetical transfers of taxes to land4 ,the first we found to be out of the question because it would appropriate the whole of the rent and destroy all private land values4 ,the second would apparently amount to two per cent4 of the value of land1 and cause land values to depreciate from twenty to forty per cent4 ,it is unnecessary to consider the probable effects of any plan that would involve heavier land taxes than the second2 that is1 the scheme of imposing all the general property tax on land2 for it represents the extreme feasible and fair limit of the movement within1 at any rate1 the next fifteen or twenty years4 ,even this degree of tax transference would be unjust to the landowners if it were brought about at once4 ,no social or other considerations exist that would justify a depreciation in land values of from twenty to forty per cent4 ,if1 however1 the process were extended over a period of1 say1 twenty years1 the decline would be only one or two per cent4 annually1 which is considerably less than the rate at which farm lands and the land in large cities have risen in value during recent years4 ,under such an arrangement the great majority of owners would probably find that the depreciation caused by the heavier land taxes1 had been more than offset by the upward tendency resulting from the increased demand for land4 ,nevertheless1 there would still be positive losses of the three kinds described a few pages back2 namely1 to owners who sold land below the price that they had paid for it2 to owners who sold vacant land at a price insufficient to cover accumulated interest on the investment2 and to owners whose aggregate tax burdens were increased4 ,some degree of each of these sorts of losses would be due specifically to the new land taxes4 ,as noted above1 public compensation in all such cases would be impracticable4 ,consequently the justification of a law that inflicts such losses must be found1 if it exists1 in social considerations4 ,the ,social ,benefits of the ,plan ,these may be summed up under three heads3 making land easier to acquire2 cheapening the products and rent of land2 and reducing the burdens of taxation borne by the poorer and middle classes4 ,an increase in the tax on land would reduce its value and price1 or at least cause the price to be lower than it would have been in the absence of the tax4 ,this does not mean that land would be more profitable to the purchaser1 since he is enabled to buy it at a lower price only because it yields him less net revenue1 or because it is less likely to increase in value4 ,the value of land is always determined by its revenue-producing power1 and by its probabilities of price-appreciation4 ,consequently1 what the purchasers would gain by the lower price resulting from the new tax1 they would lose when they came to pay the tax itself1 and when they found the chances of value increases diminished4 ,if a piece of land which brings a return of five dollars a year costs one hundred dollars before the new tax of one per cent4 is imposed1 and can be bought for eighty dollars afterward1 the net interest on the purchase price has not changed4 ,it is still five per cent4 ,hence the only advantage to the prospective purchaser of land in getting it cheaper consists in the fact that he can obtain it with a smaller outlay of capital4 ,for persons in moderate circumstances this is a very important consideration4 ,in the second place1 higher taxes would cause many existing owners either to improve their land1 in order to have the means of meeting the added fiscal charges1 or to sell it to persons who would be willing to make improvements4 ,and the desire to erect buildings and other forms of improvements would be reinforced by the reduction or abolition of taxes on those kinds of personal property which consist of building materials4 ,an increase in the rapidity of improvements on land would mean an increase in the rate at which land was brought into use1 and therefore an unusual increase in the volume of products4 ,this virtual increase in the supply of land1 and actual increase in the supply of products1 would cause a fall in three kinds of prices3 the price of products1 the rent of land1 and the price of land4 ,the last named reduction would be distinct from the reduction of land value caused in the first instance by the imposition of the tax4 ,in the third place1 the reduction1 and finally the abolition1 of taxes on improvements and personal property would be especially beneficial to the poorer and middle classes because they now pay a disproportionate share of these charges4 ,lower taxes on dwellings would mean lower rents for all persons who did not own their homes1 and lower taxes for all owners whose residence values were unusually large relatively to their land values4 ,and the tendency to lower rents on dwellings would be reinforced by the lower cost of building materials resulting1 as noted above1 from the increased supply and the lower tax on this form of personal property4 ,lower taxes on that species of personal property which consists of consumers' goods1 such as household furniture and wearing apparel1 would lessen the present inequity of taxation because this class of goods is reached to a much greater extent in the case of the poor than in the case of the rich4 ,it is not easy to conceal or to undervalue a relatively small number of simple and standard articles2 but diamonds1 costly furniture1 and luxurious wardrobes can be either hidden1 or certified to the assessor at a low valuation4 ,as for those forms of personal property which are of the nature of capital and other profit producing goods1 such as machinery and tools of all kinds1 productive animals1 money1 mortgages1 securities1 the stocks of goods held by manufacturers and merchants1 and likewise buildings which are used for productive purposes1--the taxes on all these kinds of property are for the most part shifted to the consumer4 ,the latter ultimately pays the tax in the form of higher prices for food1 clothing1 shelter1 and the other necessaries and comforts of life4#ajf ,now a tax on consumption is notoriously unfair to the poorer and middle classes because it affects a greater portion of their total expenditures1 and takes a larger per cent4 of their income than in the case of the rich4 ,hence the removal of the taxes specified in this paragraph would be at once the abolition of a fiscal injustice1 and a considerable assistance to the less fortunate classes4 ,all those landowners who occupied rented dwellings would benefit by the reduction in house rent1 and all landowners without exception would reap some advantage from the reduction or abolition of the taxes on consumers' goods and on the various forms of producers' goods4 ,it is not improbable that a considerable proportion of them would gain as much in these respects as they would lose in the capacity of landowners4 ,would the social benefits summarily described in the foregoing paragraphs be sufficient to justify the increased land taxes in the face of the losses that would be undergone by some landowners in the three ways already specified8 ,in view of our ignorance concerning the probable amount of benefits on the one hand and losses on the other1 it is impossible to give a dogmatic answer4 ,however1 when we reflect on the manifold social evils that are threatened by a rapid and continuous increase in land values1 and the resulting decrease in the proportion of the population that can hope to participate in the ownership of land1 we are forced to conclude that some means of checking both tendencies is urgently necessary for the sake of social justice and social peace4 ,the project that we have been considering2 namely1 the transfer of taxes on improvements and on personal property to land by a process extending over twenty years1 seems to involve a sufficiently large amount of advantage and a sufficiently small amount of disadvantage to justify systematic and careful experiment4 ,a ,supertax on ,large ,holdings ,every estate containing more than a maximum number of acres1 say1 ten thousand1 whether composed of a single tract or of several tracts1 could be compelled to pay a special tax in addition to the ordinary tax levied on land of the same value4 ,the rate of this supertax should increase with the size of the estate above the fixed maximum4 ,through this device large holdings could be broken up1 and divided among many owners and occupiers4 ,for several years it has been successfully applied for this purpose in ,new ,zealand and ,australia4#ajg ,inasmuch as this tax exemplifies the principle of progression1 it is in accord with the principles of justice2 for relative ability to pay is closely connected with relative sacrifice4 ,other things being equal1 the less the sacrifice involved1 the greater is the ability of the individual to pay the tax4 ,thus1 the man with an income of ten thousand dollars a year makes a smaller sacrifice in giving up two per cent4 of it than the man whose income is only one thousand dollars2 for the latter case the twenty dollars surrendered represent a privation of the necessaries or the elementary comforts of life1 while the two hundred dollars taken from the rich man would have been expended for luxuries or converted into capital4 ,while the incomes of both are reduced in the same proportion1 their satisfactions are not diminished to the same degree4 ,the wants that are deprived of satisfaction are much less important in the case of the richer than in that of the poorer man4 ,hence the only way to bring about anything like equality of sacrifice between them is to increase the proportion of income taken from the former4 ,this means that the rate of taxation would be progressive4#ajh ,it is in order to object that the principle of progression should not be applied to the taxation of great landed estates1 since a considerable part of them is unproductive1 and consequently does not directly affect sacrifice4 ,but the same objection can be urged against any taxation of unoccupied land4 ,the obvious reply is that the equal taxation of unproductive with productive land is justified by social reasons1 chiefly1 the unwisdom of permitting land to be held out of use4 ,the same social reasons apply to the question of levying an exceptionally high tax on large estates1 even though they may at present produce no revenue4 ,while the tax is sound in principle1 it is probably not much needed in ,america in connection with agricultural or urban land4 ,its main sphere of usefulness would seem to be certain great holdings of mineral1 timber1 and water power lands4 ,there are many great combinations in other industries whose formation is complete4 ,in the lumber industry1 on the other hand1 the ,bureau now finds in the making a combination caused1 fundamentally1 by a long standing public policy4 ,the concentration already existing is sufficiently impressive4 ,still more impressive are the possibilities for the future4 ,in the last forty years concentration has so proceeded that #aie holders1 many interrelated1 now have practically one-half of the privately owned timber in the investigation area 7which contains eighty per cent4 of the whole74 ,this formidable process of concentration1 in timber and in land1 clearly involves grave future possibilities of impregnable monopolistic conditions1 whose far reaching consequences to society it is now difficult to anticipate fully or to overestimate4#aji ,in ,january1 #aiaf1 the ,secretary of ,agriculture called the attention of ,congress to the fact that a small number of corporations closely associated in a policy of community of interest were threatening to secure and exercise a monopoly over the developed water power of the country4 ,ninety per cent4 of the anthracite coal lands of ,pennsylvania are owned or controlled by some nine railroads acting as a unit in all important matters4 ,for situations of this kind a supertax on large estates would seem to hold the promise of a large measure of relief4 ,to sum up the main conclusions of this very long chapter3 ,exceptionally valuable lands1 as those containing timber1 minerals1 oil1 gas1 phosphate1 and water power1 which are still under public ownership should remain there4 ,through a judicious system of loans1 deserving and efficient persons should be assisted to get possession of some land4 ,municipalities should lease rather than sell their lands1 and should strive to increase their holdings4 ,to take all the future increases in the value of land would be morally lawful1 provided that compensation were given to owners who thereby suffered positive losses of interest or principal4 ,to take a small part of the increase1 and to transfer very gradually the taxes on improvements and on personal property to land1 would probably be just1 owing to the beneficial effects upon public welfare4 ,a supertax on large holdings of exceptionally valuable and scarce land would likewise be beneficial and legitimate4#aaj ,,references ,,on ,,section ,i ,,ashley3 ,the ,origin of ,property in ,land4 ,london2 #ahib4 ,,laveleye3 ,primitive ,property4 ,london2 #ahgh4 ,,whittaker3 ,the ,taxation1 ,tenure1 and ,ownership of ,land4 ,london2 #aiad4 ,,preuss3 ,the ,fundamental ,fallacy of ,socialism4 ,st4 ,louis2 #aijh4 ,,george3 ,progress and ,poverty2 and ,a ,perplexed ,philosopher4 ,,marsh3 ,land ,value ,taxation in ,american ,cities4 ,n4 ,y42 #aiaa4 ,,fillebrown3 ,a ,single ,tax ,handbook for #aiac4 ,boston2 #aiab4 ,,young3 ,the ,single ,tax ,movement in the ,united ,states4 ,princeton2 #aiaf4 ,,shearman3 ,natural ,taxation4 ,n4 ,y42 #ahih4 ,,mathews3 ,taxation and the ,distribution of ,wealth4 ,n4 ,y42 #aiad4 ,,cathrein3 ,das ,privatgrundeigenthum und seine ,gegner4 ,freiburg2 #aiji4 ,,fallon3 ,les ,plus-,values et l',impot4 ,paris2 #aiad4 ,,nearing3 ,anthracite4 ,philadelphia2 #aiaf4 ,,haig3 ,final ,report of the ,committee on ,taxation of the ,city of ,new ,york2 #aiaf4 ,the exemption of ,improvements from ,taxation in ,canada and ,u4 ,s42 #aiae4 ,some ,probable ,effects of ,exemption in ,city of ,new ,york2 #aiae4 ,,kelleher3 ,private ,ownership4 ,dublin2 #aiaa4 ,proceedings of the #aiac ,meeting of the ,american ,economic ,association4 ,u4 ,s4 ,,commissioner ,,of ,,corporations3 ,reports on the ,lumber1 ,petroleum1 ,steel1 and ,water ,power of the ,united ,states4 ,,seligman3 ,essays in ,taxation2 ,shifting and ,incidence of ,taxation2 and ,progressive ,taxation in ,theory and ,practice4 ,also the works of ,taussig1 ,devas1 ,carver1 ,pesch1 ,king1 ,vermeersch1 ,willoughby1 and the ,commission on ,industrial ,relations1 all of which are cited at the end of the introductory chapter4 ,,footnotes3 #hd ,summary of ,report of the ,commissioner of ,corporations on the ,timber ,industry in the ,united ,states1 p4 #c4 #he ,report of the ,commissioner of ,corporations on ,water ,power ,development in the ,united ,states1 pp4 #aic-aie4 #hf ,idem1 pp4 #d1 #e4 #hg ,abstract of the ,thirteenth ,census1 p4 #eeb4 #hh ,cf4 ,marsh1 ,land ,value ,taxation in ,american ,cities1 p4 #ie4 #hi ,municipal purchase and ownership of land have been advocated by such a conservative authority as the ,rev4 ,heinrich ,pesch1 ,s4,j4 ,lehrbuch der ,nationaloekonomie1 ,i1 #bjc4 #ij ,as we shall see in a later chapter1 the confiscation and injustice would be smaller if the ,state should simultaneously abolish interest4 ,in any case1 the decline in land value resulting from complete confiscation of rent should be made up to the private owner by public compensation4 #ia ,principles of ,political ,economy1 book ,v1 ch4 #b1 sect4 v4 #ib ,progressive ,taxation in ,theory and ,practice1 #aijh1 p4 #acj4 #ic ,cf4 ,taussig1 ,principles of ,economics1 ,,ii1 #eaf3 ,seligman1 ,the ,shifting and ,incidence of ,taxation1 p4 #bbc4 #id ,the discrimination objection is put in a somewhat different form by the ,rev4 ,sydney ,f4 ,smith1 ,s4,j41 in an article in ,the ,month1 ,sept41 #aiji1 entitled ,the ,theory of ,unearned ,increment4 ,his argument is in substance that if the people of a city can claim the increases in land values which their presence and activity have occasioned1 the purchasers of food1 clothes1 books1 or concert tickets are equally justified in claiming that1 having added to the value of the shops and music halls1 they had acquired a co-proprietary right in the increased value of the owners' stock1 and the owners' premises4 ,while this argument is specifically directed against those who maintain that the social production of values confers a right thereto1 it affects to some extent our thesis that there is a vast difference between value-increases in land and in other goods4 ,father ,smith seems to confuse the origination of value with the increase of value4 ,the presence of consumers is an obvious prerequisite to the existence of any value at all in any kind of goods1 but labour and financial outlay on the part of the producers of the goods are an equally indispensable prerequisite4 ,the reason why the value is appropriated by the latter rather than the former is that this is clearly the only rational method of distribution4 ,what we are concerned with here1 however1 is not this initial or cost-of-production-value of artificial goods1 but the increases in value above this level which are brought about by external and social influences4 ,theoretically1 the ,state could as reasonably take these as the increases in the value of land2 practically1 such a performance is out of the question1 for the simple reason that such increases are spasmodic and exceptional4 ,if ,father ,smith thinks that food or clothes1 or books1 or concert tickets regularly advance above the cost-of-production-value1 he is simply mistaken4 ,since these and other artificial goods bring to their owners as a rule no socially occasioned increments of value1 they and their owners are in quite a different situation from land and the owners of land4 #ie ,cf4 ,seligman1 ,progressive ,taxation in ,theory and ,practice1 part ,,ii1 chs4 ii and iii2 also the classic refutation of the benefit theory by ,john ,stuart ,mill in ,principles of ,political ,economy1 book ,v1 ch4 ii1 sec4 #b4 ,the traditional ,catholic teaching on the subject is compactly stated by ,cardinal de ,lugo in ,de ,justitia et ,jure1 disp4 #cf2 cf4 ,devas1 ,political ,economy1 p4 #eid1 #b;d ed4 #if ,cf4 ,fallon1 ,les ,plus-,values et l',impot1 pp4 #dee1 sq42 ,paris1 #aiad2 ,fillebrown1 ,a ,single ,tax ,handbook for #aiac2 ,boston1 #aiab2 ,marsh1 ,taxation of ,land ,values in ,american ,cities1 pp4 #ij-ib2 ,new ,york1 #aiaa2 ,the ,quarterly ,journal of ,economics1 vols4 #bb1 #bd1 #be2 ,the ,single ,tax ,review1 ,march-,april1 #aiab2 ,stimmen aus ,maria-,laach1 ,oct41 #aijg4 #ig ,see the references in the second last paragraph4 #ih ,the most comprehensive and reliable account of the special land taxes in ,canada is contained in the report prepared for the ,committee on ,taxation of the ,city of ,new ,york1 by ,robert ,murray ,haig1 ,ph4,d41 entitled1 ,the ,exemption of ,improvements from ,taxation in ,canada and the ,united ,states2 ,new ,york1 #aiae4 ,see also ,fallon1 op4 cit41 pp4 #deb-dee4 #ii ,cf4 ,fallon1 op4 cit41 pp4 #ddc-deb4 #ajj ,the ,wealth and ,income of the ,people of the ,united ,states1 pp4 #aeh1 #adc4 #aja ,abstract of ,bulletins on ,wealth1 ,debt1 and ,taxation1 p4 #af2 ,u4 ,s4 ,census1 #aiac4 #ajb ,idem1 p4 #ae4 #ajc ,idem1 p4 #af2 and ,bulletin of the ,census on ,estimated ,valuation of ,national ,wealth1 p4 #ae4 #ajd ,special ,report of the ,twelfth ,census on ,wealth1 ,debt1 and ,taxation1 pp4 #ab1 #ac4 #aje ,haig1 ,probable ,effects of ,exemption of ,improvements44441 p4 #bc4 #ajf ,cf4 ,seligman1 ,the ,shifting and ,incidence of ,taxation1 pp4 #ahg1 #bde1 #bgb1 and all of part ,,ii2 ,n4 ,y41 #ahii2 ,taussig1 ,principles of ,economics1 ,,ii1 #eah-edi1 and chs4 #fg-fi4 #ajg ,cf4 ,fallon1 op4 cit41 pp4 #ddb1 sq4 #ajh ,cf4 ,vermeersch1 ,quaestiones de ,justitia1 pp4 #id-abf2 ,seligman1 ,progressive ,taxation in ,theory and ,practice1 pp4 #baj1 #baa2 ,mill1 ,principles of ,political ,economy1 book ,v1 ch4 ii1 sec4 #c4 #aji ,summary of ,report of the ,commissioner of ,corporations on the ,lumber ,industry in the ,united ,states1 p4 #h4 #aaj ,probably the most concrete and satisfactory discussion of the increment tax and the project to transfer improvement taxes to land1 is that presented in the ,final ,report of the ,committee on ,taxation of the ,city of ,new ,york2 #aiaf4 ,it contains brief1 though complete1 statements of all phases of the subject1 together with concise arguments on both sides1 majority and minority recommendations1 a great variety of dissenting individual opinions1 and considerable testimony by experts1 authorities1 and other interested persons4 ,,section ,,ii ,,the ,,morality ,,of ,,private ,,capital ,,and ,,interest ,,chapter ,,ix ,,the ,,nature ,,and ,,the ,,rate ,,of ,,interest ,interest denotes that part of the product of industry which goes to the capitalist4 ,as the ownership of land commands rent1 so the ownership of capital commands interest2 as rent is a price paid for the use of land1 so interest is a price paid for the use of capital4 ,however1 the term capital is less definite and unambiguous1 both in popular and in economic usage1 than the word land4 ,the farmer1 the merchant1 and the manufacturer often speak of their land1 buildings1 and chattels as their capital1 and reckon the returns from all these sources as equivalent to a certain per cent4 of interest or profit4 ,this is not technically correct2 when we use the terms capital and interest we should exclude the notions of land and rent4 ,meaning of ,capital and ,capitalist ,capital is ordinarily defined as1 wealth employed directly for the production of new wealth4 ,according as it is considered in the abstract or the concrete1 it is capital-value or capital-instruments4 ,for example1 the owner of a wagon factory may describe his capital as having a value of #ajj1jjj dollars1 or as consisting of certain buildings1 machines1 tools1 office furniture1 etc4 ,in the former case he thinks of his capital as so much abstract value which1 through a sale1 he could take out of the factory1 and put into other concrete capital forms1 such as a railroad or a jobbing house4 ,in the latter case he has in mind the particular instruments in which his capital is at present embodied4 ,the capital-value concept is the more convenient1 and is usually intended when the word capital is used without qualification4 ,it is also the basis upon which interest is reckoned2 for the capitalist does not measure his share of the product as so many dollars of rent on his capital-instruments1 but as so many per cent4 on his capital-value4 ,capitalists are of two principal kinds3 those who employ their own money in their own enterprises2 and those who lend their money to others for use in industry4 ,the former may be called active capitalists1 the latter loan-capitalists4 ,perhaps a majority of active capitalists use some borrowed money in their business4 ,to the lenders of this borrowed money or capital they turn over a part of the product in the form of interest4 ,when1 therefore1 interest is defined as the share of the product that goes to the capitalist1 it is the owner of capital-value rather than of capital-instruments that is meant4 ,for the man who has loaned #ej1jjj dollars at five per cent4 to the wagon manufacturer is not1 except hypothetically1 the owner of the buildings which have been erected with that money4 ,these are owned 7subject possibly to a mortgage7 by the borrower1 the active capitalist4 ,but the abstract value which has gone into them continues to be the property of the lender4 ,as owner thereof1 he1 instead of the active capitalist1 receives the interest that is assigned to this portion of the total capital4 ,hence interest is the share of the product that is taken by the owner of capital1 whether he employs it himself or lends it to some one else4 ,while the fundamental reason of interest is the fact that certain concrete instruments are necessary to the making of the product1 interest is always reckoned on capital-value1 and goes to the owner of the capital-value4 ,it goes to the man whose money has been put into the instruments1 whether or not he is the owner of the instruments4 ,meaning of ,interest ,interest is the share of the capitalist as capitalist4 ,the man who employs his own capital in his own business receives therefrom in addition to interest other returns4 ,let us suppose that some one has invested #ajj1jjj dollars of borrowed money and #ajj1jjj dollars of his own money in a wholesale grocery business4 ,at the end of the year1 after defraying the cost of labour1 materials1 rent1 repairs1 and replacement1 his gross returns are #ae1jjj dollars4 ,out of this sum he must pay five thousand dollars as interest on the money that he has borrowed4 ,this leaves him a total amount of ten thousand dollars1 as his share of the product of the industry4 ,since he could command a salary of three thousand dollars if he worked for some one else1 he regards his labour of directing his own business as worth at least this sum4 ,deducting it from ten thousand dollars1 he has left seven thousand dollars1 which must in some sense be accredited as payment for the use of his own capital4 ,however1 it is not all pure interest2 for he runs the risk of losing his capital1 and also of failing to get the normal rate of interest on it during future unprosperous years4 ,hence he will require a part of the seven thousand dollars as insurance against these two contingencies4 ,two per cent4 of his capital1 or two thousand dollars1 is not an excessive allowance4 ,if the business did not provide him with this amount of insurance he would probably regard it as unsafe1 and would sell it and invest his money elsewhere4 ,subtracting two thousand dollars from seven thousand1 we have five thousand left as pure interest on the director's own capital4 ,this is equivalent to five per cent41 which is the rate that he is paying on the capital that he has borrowed4 ,if he could not get this rate on his own money he would probably prefer to become a lender himself1 a loan capitalist instead of an active capitalist4 ,this part of his total share1 then1 and only this part1 is pure interest4 ,the other two sums that he receives1 the three thousand dollars and the two thousand dollars1 are respectively wages for his labour and insurance against his risks4 ,sometimes they are classified together under the general name of profits4 ,let us suppose1 however1 that the gross returns are not #ae1jjj dollars1 but #ag1jjj4 ,how is the additional sum to be denominated8 ,in strict economic language it would probably be called net profits1 as distinguished from normal or necessary profits1 which comprise wages of direction and insurance against loss4 ,sometimes it is called interest4 ,in that case the owner of the store would receive seven instead of five per cent1 on his own capital4 ,whether the extra two per cent4 7#b1jjj dollars7 be called net profits or surplus interest1 is mainly a matter of terminology4 ,the important thing is to indicate clearly that these terms designate the surplus which goes to the active capitalist in addition to necessary profits and necessary interest4 ,at the risk of wearisome repetition1 one more example will be given to illustrate the distinction between interest and the other returns that are received in connection with capital4 ,the annual income from a railway bond is interest on lender's capital1 and consequently pure interest4 ,ordinarily the bondholder is adequately protected against the loss of his capital by a mortgage on the railroad4 ,on the other hand1 the holder of a share of railway stock is a part owner of the railroad1 and consequently incurs the risk of losing his property4 ,hence the dividend that he receives on his stock comprises interest on capital plus insurance against loss4 ,it is usually one or two per cent4 higher than the rate on the bonds4 ,since the officers and directors are the only shareholders who perform any labour in the management of the railroad1 only they receive wages of management4 ,consequently the gross profits are divided into interest and dividends at fixed rates1 and fixed salaries4 ,when a surplus exists above these requirements it is not1 as a rule1 distributed among the stockholders annually4 ,in railroads1 therefore1 and many other corporations1 interest is easily distinguished from those other returns with which it is frequently confused in partnerships and enterprises carried on by individuals4 ,the ,rate of ,interest ,is there a single rate of interest throughout industry8 ,at first sight this question would seem to demand a negative answer4 ,united ,states bonds pay about two per cent42 banks about three per cent42 municipal bonds about four per cent42 railway bonds about five per cent42 the stocks of stable industrial corporations about six per cent4 net2 real estate mortgages from five to seven per cent42 promissory notes somewhat higher rates2 and pawnbrokers' loans from twelve per cent4 upwards4 ,moreover1 the same kind of loans brings different rates in different places4 ,for example1 money lent on the security of farm mortgages yields only about five per cent4 in the states of the ,east1 but seven or eight per cent4 on the ,pacific coast4 ,these and similar variations are differences not so much of interest as of security1 cost of negotiation1 and mental attitude4 ,the farm mortgage pays a higher rate than the government bond partly because it is less secure1 partly because it involves greater trouble of investment1 and partly because it does not run for so long a time4 ,for the same reasons a higher rate of interest is charged on a promissory note than on a bank deposit certificate4 ,again1 the lower rates on government bonds and bank deposits are due in some degree to the peculiar attitude of that class of investors whose savings are small in amount1 who are not well aware of the range of investment opportunities1 and to whom security and convenience are exceptionally important considerations4 ,if such persons did not exist the rates on government bonds and savings deposits would be higher than they actually are4 ,the higher rates in a new country on1 say1 farm mortgages are likewise due in part to psychical peculiarities4 ,where men are more speculative and more eager to borrow money for industrial purposes1 the demand for loans is greater relatively to the supply than in older and more conservative communities4 ,therefore1 the price of the loans1 the rate of interest1 is higher4 ,in one sense it would seem that the lowest of the rates cited above1 namely1 that on ,united ,states bonds1 represents pure interest1 and that all the other rates are interest plus something else4 ,nevertheless1 the sums invested in these bonds form but a very small part of the whole amount of money and capital drawing interest1 and they come from persons who do not display the average degree either of business ability or of willingness to take risks4 ,hence it is more convenient and more correct to regard as the standard rate of interest in any community that which is obtained on first class industrial security1 such as the bonds of railroads and other stable corporations1 and mortgages on real estate4 ,loans to these enterprises are subject to what may properly be called the average or prevailing industrial risks1 are negotiated in average psychical conditions1 and embrace by far the greater part of all money drawing interest2 consequently the rate that they command may be looked upon as in a very real and practical sense normal4 ,while this conception of the normal rate is in a measure conventional1 it accords with popular usage4 ,it is what most men have in mind when they speak of the prevailing rate of interest4 ,the prevailing or standard rate in any community can usually be stated with a sufficient approach to precision to be satisfactory for all practical purposes4 ,in all the ,eastern ,states it is now about five per cent42 in the ,middle ,west it is somewhere between five and six per cent42 on the ,pacific coast it is between six and seven per cent4 ,the supreme court of ,minnesota decided in #ahif that1 in view of the actual rates of interest then obtaining1 five per cent4 on the reproduction cost of railroads was a fairly liberal return1 and could be adopted by the state authorities in fixing charges for carrying freight and passengers4#aaa ,a few years later the ,michigan tax commission allowed the railroads four per cent4 on the reproduction cost of their property1 on the ground that investments which yielded that rate in addition to the usual tax of one per cent4 7or five per cent4 before the deduction of the tax7 stood at par on the stock market4#aab ,in other words1 the prevailing rate was five per cent4 ,at the beginning of the year #aijg1 the railroad commission of ,wisconsin fixed six per cent4 as the return to which the stockholders of railroads were entitled1 because this was about the return which investors generally were able to get on that kind of security4 ,in the view of the ,commission1 the current rate of interest on railroad bonds1 and similar investments1 was about five per cent4#aac ,the significance of these decisions by the public authorities of three states is found not so much in the particular rates which they sanctioned as in the fact that they were able to determine a standard or prevailing rate4 ,therefore a standard rate exists4 ,at the same time it is interesting to note that in all three states the rate of industrial interest was declared to be about the same1 that is1 five per cent4 ,perhaps it is safe to say that1 throughout the greater part of the industrial field of ,america1 five or six per cent4 is the prevailing rate of interest4 ,what causes the rate to be five per cent41 or six per cent41 or any other per cent48 ,briefly stated1 it is the interplay of supply and demand4 ,since interest is a price paid for the use of a thing1 i4e41 capital1 its rate or level is determined by the same general forces that govern the price of wheat1 or shoes1 or hats1 or any other commodity that is bought and sold in the market4 ,the rate is five or six per cent4 because at that rate the amount of money offered by lenders equals the amount demanded by borrowers4 ,should the amount offered at that rate increase without a corresponding increase in the amount demanded1 the rate would fall1 just as it would rise under opposite conditions4 ,supply and demand1 however1 are merely the immediate forces4 ,they are themselves the outcome or resultant of factors more remote4 ,on the side of supply1 the principal remote forces which regulate the rate of interest are3 the industrial resources of the community1 and the relative strength of its habits of saving and spending4 ,on the side of demand1 the chief ultimate factors are3 the productivity of capital-instruments1 the comparative intensity of the social desires of investing and lending1 and the supplies of land1 business ability and labour4 ,each of these factors exercises upon the rate of interest an influence of its own1 and each of them may be assisted or counteracted by one or more of the others4 ,precisely what rate will result from any given condition of the factors1 cannot be stated beforehand1 for the factors cannot be measured in such a way as to provide a basis for this kind of forecast4 ,all that can be said is that1 when changes occur on the side of either demand or supply1 there will be a corresponding change in the rate of interest1 provided that no neutralising change takes place on the other side4 ,,footnotes3 #aaa ,final ,report of the ,industrial ,commission1 pp4 #daj1 #daa4 #aab ,report of the ,industrial ,commission1 vol4 ,,ix1 p4 #chj4 #aac ,publication ,no4 #cb of the ,railroad ,commission of ,wisconsin1 pp4 #afe1 #aff4 ,,chapter ,x ,,the ,,alleged ,,right ,,of ,,labour ,,to ,,the ,,entire ,,product ,,of ,,industry ,in a preceding chapter we saw that ,marxian ,socialism is logically debarred from passing moral judgment upon any social institution or practice4#aad ,if social institutions are produced necessarily by socio-economic forces they are neither morally good nor morally bad4 ,they are quite as unmoral as rain and snow1 verdure and decay1 tadpoles and elephants4 ,consistent ,socialists cannot1 therefore1 censure on purely ethical grounds the system of private capital and interest4 ,this logical requirement of the theory of economic determinism is exemplified in much of the rigidly scientific discussions of ,socialists4 ,marx maintained that the value of commodities is all determined and created by labour1 and that interest is the surplus which the labourer produces above the cost of his keep2 nevertheless ,marx did not formally assert that the labourer has a moral right to the whole product1 nor that interest is theft4 ,he set forth his theories of value and surplus value as positive explanations of economic facts1 not as an ethical evaluation of human actions4 ,his object was to show the causes and nature of value1 wages1 and interest1 not to estimate the moral claims of the agents of production1 or the morality of the distributive process4 ,in his formal discussion of the theory of value and of surplus value1 ,marx said nothing that implied a belief in genuine moral responsibility1 or that contradicted the principles of philosophical materialism and economic determinism4 ,it is1 therefore1 quite erroneous to infer that1 since the ,marxian theory attributes all value and products to the action of labour1 ,marxian ,socialists must condemn the interest-taker as a robber4 ,neither ,marx nor any other ,socialist authority1 however1 has always held consistently to this purely positive method of economic exposition4 ,when they declare that the labourer is exploited1 that surplus value is filched from him1 that the capitalist is a parasite1 etc41 they are expressing and conveying distinct moral judgments4 ,in their more popular writings ,socialist authors do not seriously attempt to observe the logical requirements of their necessitarian philosophy4 ,they assume the same ethical postulates1 and give expression to the same ethical intuitions as the man who believes in the human soul and free will4#aae ,and the great majority of their followers likewise regard the question of distribution as a moral question1 as a question of justice4 ,in their view the labourer not only creates all value1 but has a just claim to the whole product4 ,the ,labour ,theory of ,value ,this doctrine is sometimes formally based upon the ,marxian theory of value1 and is sometimes defended independently of that theory4 ,in the former case its groundwork is about as follows3 ,by eliminating the factors of utility and scarcity1 ,marx found that the only element common to all commodities is labour1 and then concluded that labour is the only possible explanation1 creator1 and determinant of value4#aaf ,since capital1 that is1 concrete capital1 is a commodity1 its value is likewise determined and created by labour4 ,since it cannot create value1 for only labour has that power1 it can contribute to the product of the productive process in which it is engaged only as much value as it originally received4 ,since it is only a reservoir of value1 it cannot transfer more value than it holds and possesses4 ,in the words of ,marx1 the means of production transfer value to the new product1 so far only as during the labour-process they lose value in the shape of the old use-value4 ,the maximum loss of value that they can suffer in the process is plainly limited by the amount of the original value with which they came into the process1 or1 in other words1 by the labour time necessary for their production4 ,therefore1 the means of production can ever add more value to the product than they themselves possess independently of the process in which they assist4 ,however useful a given kind of raw material1 or a machine1 or other means of production may be1 though it may cost #aej pounds1 or say #ejj days' labour1 yet it cannot1 under any circumstances1 add to the value of the product more than #aej pounds4#aag ,to view the matter from another angle3 capital contributes to the product only sufficient value to pay for its own reproduction4 ,when1 as is the normal usage1 the undertaker has deducted from the product sufficient value or money to replace the deteriorated or worn out machine1 or other concrete capital1 all the remaining value in the product is due specifically to labour4 ,when1 therefore1 the capitalist goes further1 and appropriates from the product interest and profits1 he takes a part of the value that labour has created4 ,he seizes the surplus value which labour has produced in excess of the wages that it receives4 ,in ethical terms1 he robs the labourers of a part of their product4 ,it is not necessary to introduce any extended refutation of this arbitrary1 unreal1 and fantastic argument4 ,the theory that labour is the sole source of value has few defenders to-day4 ,in the face of the overwhelming criticism which has been directed against it1 even good ,marxists are forced to abandon it1 or to explain it away4#aah ,it may1 however1 be useful to recount very briefly the facts which disprove the theory4 ,labour creates some things which have no value1 as wooden shoes in a community that does not desire wooden shoes2 some things have value1 exchange value1 although no labour has been expended upon them1 as land and minerals2 the value of things is sometimes greater1 sometimes less1 proportionately1 than the labour embodied in them2 for example1 paintings by the old masters1 and last year's styles of millinery2 and1 finally1 the true determinants of value are utility and scarcity4 ,if it be objected that ,marx was aware of these two factors1 the reply is that he either restricted them to the function of conditions rather than efficient causes of value1 or attributed to them an influence that is inconsistent with his main theory that labour is the sole determinant of value4 ,indeed1 the contradictions into which ,marx was led by the theory are its sufficient refutation4#aai ,with the destruction of the labour theory of value1 the ,marxian contention that capital contributes only its own original value to the product is likewise overthrown4 ,the same conclusion is reached more directly by recalling the obvious facts of experience that1 since the joint action of both capital and labour is required to bring into being every atom of the product1 each is in its own order the cause of the whole product1 and the proportion of the whole that is specifically due to the casual influence of either is as incapable of determination as the procreative contribution of either parent to their common offspring4 ,the productive process carried on by labour and capital is virtually an organic process1 in which the precise amount contributed by either factor is unknown and unknowable4 ,in so far1 therefore1 as the alleged right of labour to the whole product is based upon the ,marxian theory of value1 it has not a shadow of validity4 ,the ,right of ,productivity ,but the claim is not necessarily dependent upon this foundation4 ,those ,socialists who have abandoned the labour theory of value can argue that the labourer 7including the active director of industry7 is the only human producer1 that the capitalist as such produces nothing1 and consequently has no moral claim to any part of the product4 ,whatever theory of value we may adopt1 or whether we adopt any1 we cannot annul the fact that interest does not represent labour expended upon the product by the capitalist4 ,nevertheless1 this fact does not compel the conclusion that the share of the product now taken by the capitalist belongs of right to the labourer4 ,productivity does not of itself create a right to the product4 ,it is not an intrinsic title4 ,that is to say1 a right to the product is not inherent in the relation between product and producer4 ,it is determined by certain extrinsic relations4 ,when ,brown makes a pair of shoes out of materials that he has stolen1 he has not a right to the whole product2 when ,jones turns out a similar product from materials that he has bought1 he becomes the exclusive owner of the shoes4 ,the intrinsic relation of productivity is the same in both cases4 ,it is the difference of extrinsic relation1 namely1 the relation between the producer and the material1 that begets the difference between the moral claims of the two producers upon the product4 ,the right of the producer is conditioned by certain other and more fundamental relations4 ,why has ,jones a right to the shoes that he has made out of materials that he has bought8 ,not because he needs them2 he is not alone in this condition4 ,the ultimate reason and basis of his ownership is to be sought in the practical requirements of an equitable social distribution4 ,unless men receive an adequate return for their labour1 they will not be able to satisfy their wants in a regular and sufficient manner4 ,if they are forced to labour for others without compensation1 they are deprived of the opportunity to develop their personality4 ,they are treated as mere instruments to the welfare of beings who are not their superiors1 but their moral and juridical equals4 ,their intrinsic worth and sacredness of personality is outraged1 their essential equality with their fellows is disregarded1 and their indestructible rights are violated4 ,on the other hand1 when a producer1 such as ,jones1 gets possession of his product1 he subordinates no human being to himself1 deprives no man of the opportunity to perform remunerative labour1 nor appropriates an unreasonable share of the common bounty of the earth4 ,he has a right to his product because this is one of the reasonable methods of distribution4 ,in fact1 it is the exigencies of reasonable distribution that constitute the fundamental justification of every title of ownership4 ,the title of purchase by which a man claims the hat that he wears2 the title of inheritance by which a son claims the house that once belonged to his father2 the title of contract through which a labourer gets wages1 a merchant prices1 and a landlord rent1--are all valid simply because they are reasonable devices for enabling men to obtain the goods of the earth for the satisfaction of their wants4 ,all titles of property1 productivity included1 are conventional institutions which reason and experience have shown to be conducive to human welfare4 ,none of them possesses intrinsic or metaphysical validity4#abj ,therefore1 the ,socialist cannot establish the right of labour to the full product of industry until he proves that this so-called right could be reduced to practice consistently with individual and social welfare4 ,in other words1 he must show that to give the entire product to the labourer would be a reasonable method of distribution4 ,now the arrangement by which the ,socialist proposes to award the whole product of labour is the collective ownership and operation of the means of production1 and the social distribution of the product4 ,if this system would not enable the labourer and the members of society generally to satisfy their wants to better advantage than is possible under the present system1 the contention that the labourer has a right to the entire product of industry falls to the ground4 ,the question will be considered in the following chapter4 ,,footnotes3 #aad ,cf4 ,engels1 ,socialism3 ,utopian and ,scientific1 pp4 #de1 #df2 and ,hillquit-,ryan1 ,socialism3 ,promise or ,menace1 #ajc1 #ajd1 #adc-ade4 #aae ,cf4 ,hillquit-,ryan1 op4 cit41 pp4 #ge1 #gf4 #aaf ,capital1 pp4 #a-i4 #aag ,op4 cit41 p4 #aag2 ,humboldt ,edition4 #aah ,skelton1 ,socialism3 ,a ,critical ,analysis1 pp4 #aba1 #abb4 #aai ,cf4 ,skelton1 loc4 cit4 #abj ,the exaggerated claims made on behalf of social productivity in the matter of land values have been examined in a previous chapter4 ,similar exaggerations with regard to capital will be considered in chapter xii4 ,,chapter ,,xi ,,the ,,socialist ,,scheme ,,of ,,industry ,never has our party told the workingman about a ',state of the future1' never in any way than as a mere utopia4 ,if anybody says3 ',i picture to myself society after our programme has been realised1 after wage labour has been abolished1 and the exploitation of men has ceased1 in such and such a manner1--' well and good2 ideas are free1 and everybody may conceive the ,socialist ,state as he pleases4 ,whoever believes in it may do so2 whoever does not1 need not4 ,these pictures are but dreams1 and ,social ,democracy has never understood them otherwise4#aba ,such is the official attitude of ,socialism toward descriptions of its contemplated industrial organisation4 ,the party has never drawn up nor approved any of the various outlines of this sort which have been defended by individual ,socialists4 ,it maintains that it cannot anticipate even the essential factors in the operation of a social and industrial system which will differ so widely from the one that we have to-day1 and which will be so profoundly determined by events that are in the nature of the case impossible to prognosticate4 ,socialist ,inconsistency ,from the viewpoint of all but convinced ,socialists1 this position is indefensible4 ,we are asked to believe that the collective ownership and operation of the means of production would be more just and beneficial than the present plan of private ownership and operation4 ,yet the ,socialist party refuses to tell us how the scheme would bring about these results2 refuses to give us1 even in outline1 a picture of the machine at work4 ,as reasonably might we be expected to turn the direction of industry over to a ,rockefeller or a ,morgan1 making an act of faith in their efficiency and fairness4 ,we are in the position of a man who should be advised to demolish an unsatisfactory house1 without receiving any solid assurance that the proposed new one would be as good4 ,to our requests for specific information about the working of the new industrial order the ,socialists1 as a rule1 answer in terms of prophesied results4 ,they leave us in the dark concerning the causes by which these wonderful results are to be produced4 ,from the viewpoint of the confirmed ,socialist1 however1 this failure to be specific is not at all unreasonable4 ,he can have faith in the ,socialist system without knowing beforehand how it will work4 ,he believes in its efficacy because he believes that it is inevitable4 ,in the words of ,kautsky1 what is proved to be inevitable is proved not only to be possible1 but to be the only possible outcome4#abb ,the ,socialist believes that his scheme is inevitable because he thinks that it is necessarily included in the outcome of economic and social evolution4 ,neither the premises nor the conclusion of this reasoning is valid4 ,the doctrines of economic determinism1 the class struggle1 the concentration of capital1 the disappearance of the middle classes1 the progressive pauperisation of the working classes1 and all the other tenets of the ,socialist philosophy1 have been thoroughly discredited by the facts of psychology1 the experience of the last half century1 and the present trend of industrial and social forces4#abc ,even if the ,socialist outcome were inevitable1 it would not necessarily be an improvement on the present system4 ,it might illustrate the principle of retrogression4 ,since we cannot make an act of faith in either the inevitableness or the efficacy of the ,socialist industrial scheme1 we are compelled to submit it to the ordinary tests of examination and criticism4 ,we must try to see what would be the essential structure1 elements1 and operation of a system in which the means of production were owned and managed collectively1 and the product socially distributed4 ,in attempting to describe the system1 we shall be guided by what seems to be inherently necessary to it1 and by the prevalent conception of it among present day ,socialists4 ,in this connection we have to observe that some of the criticisms of the ,socialist order attribute to it elements that are not essential1 nor any longer demanded by the authoritative spokesmen of the movement2 for example1 complete confiscation of capital1 compulsory assignment of men to the different industrial tasks1 equality of remuneration1 the use of labour checks instead of money1 the socialisation of all capital down to the smallest tool1 and collective ownership of homes4 ,expropriating the ,capitalists ,the first problem confronting a ,socialist administration would be the method of getting possession of the instruments of production4 ,in the early years of the ,socialist movement1 most of its adherents seemed to favour a policy of outright confiscation4 ,professor ,nearing estimates the total property income now paid in the ,united ,states as1 well above the six-billion-dollar mark4#abd ,were the ,socialist ,state to seize all land and capital without compensation1 it could conceivably transfer more than six billion dollars annually from landowners and capitalists to the community4 ,not all of it1 however1 would be available for diversion to the labourers4 ,according to the computations of ,professor ,king1 about two billion dollars were in #aiaj saved and converted into capital4#abe ,a progressive ,socialist rgime would want to appropriate at least that sum for the renewal and increase of the instruments of production4 ,consequently1 it would have only four billion dollars to add to the present total income of labour4 ,this would be equivalent to #dc4ej for every person in the ,united ,states4 ,desirable as would be such an addition to the remuneration of labour1 it could never be realised through the process of confiscation4 ,the owners of land and capital would be sufficiently powerful to defeat any such simple scheme of setting up the collectivist commonwealth4 ,they constitute probably a majority of the adults of our population1 and their economic advantages would make them much stronger relatively than their numbers4#abf ,ethically the policy of confiscation would be1 on the whole1 sheer robbery4 ,to be sure1 not all owners of land and capital have a valid claim to all their possessions1 but practically all of them hold the greater part of their wealth by some kind of just title4 ,much land and capital that was originally acquired by unjust means has become morally legitimatised by the title of prescription4 ,the majority of present day ,socialists seem to advocate at least partial compensation4#abg ,but this plan does not seem to offer any considerable advantage over complete confiscation4 ,as regards morality1 it would differ only in the degree of its injustice2 as regards expediency1 it would be at best of doubtful efficacy4 ,if the capitalists were given only a small fraction of the value of their holdings they would oppose the change with quite as much determination as though they were offered nothing2 if they were paid almost the full value of their possessions there would be no substantial gain to the community from the transfer2 if they were compensated at a figure somewhere between these two extremes their resistance would still be more costly to the ,state than the extra amount required to make full compensation4 ,finally1 if full compensation were offered it would have to take the form of government obligations1 securities1 or bonds4 ,if these did not bear interest the great majority of capital owners would regard the scheme as partial and considerable confiscation1 and would fight it with determination and effectiveness4 ,if the ,state bound itself to pay interest on the bonds it would probably find itself giving the dispossessed capitalists as high a rate of return on their capital1 as large a share of the national product1 as they receive under the present system4 ,consequently1 the expropriation of the capitalists would bring no direct and pecuniary gain to the labouring classes4 ,indeed1 the latter would suffer positive loss by the change1 owing to the fact that the ,state would be required to withdraw from the national product a considerable amount for the maintenance1 renewal1 and expansion of the instruments of production4 ,at present the capitalist class performs the greater part of this function through the reinvestment of the incomes that it receives in the form of interest and rent4 ,the average ,socialist entirely ignores this capitalistic service1 when he draws his pessimistic picture of the vast share of the national product which now goes to idle capitalists4 ,so far as the larger capitalist incomes are concerned2 that is1 those in excess of twenty-five thousand dollars annually1 it is probable that the greater part is not consumed by the receivers1 but is converted into socially necessary capital instruments4 ,since this would not be permitted in a ,socialist order1 the capitalists would strive to consume the whole of the incomes received from the public securities1 and the ,state would be compelled to provide the required new capital out of the current national product4 ,in a word1 society would have to give the capitalists as much as it does at present1 and to withhold from the labourers for new capital an immense sum which is now furnished by the capitalists4 ,it is undoubtedly true that the richest capitalists would be unable to expend the whole of their incomes upon themselves and their families4 ,if they turned a considerable part of it over to the ,state1 the surrendered sum would be available as capital1 thereby reducing the amount that the ,state would need to take out of the national product for this purpose4 ,were all those possessing incomes in excess of fifty thousand dollars per family to give up all above that amount1 the total thus accruing to the ,state would be a little more than one billion dollars4#abh ,but this would be only one-half the required new capital4 ,a part of the additional one billion is now provided out of wages and salaries1 but the greater part probably comes out of rent and interest4 ,under ,socialism this latter portion would have to be deducted from that part of the national product which at present goes to the workers and is consumed by them4 ,hence they would undergo a loss of several hundred million dollars4 ,one reply to this difficulty is that the total product of industry would be much increased under ,socialism4 ,undoubtedly an efficient organisation of industry on collectivist lines would be able to effect economies by combining manufacturing plants1 distributive concerns1 and transportation systems1 and by reducing unemployment to a minimum2 but it could not possibly make the enormous economies that are promised by the ,socialists4 ,the assertion that under ,socialism men would be able to provide abundantly for all their wants on a basis of a working day of four1 or even two1 hours is seductive and interesting1 but it has no support in the ascertainable facts of industrial resources4 ,even if the ,socialist organisation were operating with a fair degree of efficiency1 the gains that it could effect over the present system would probably not more than offset the social losses resulting from increased consumption by the compensated capitalists4 ,but the proposed industrial organisation would not operate with a fair degree of efficiency4 ,according to present ,socialist thought1 industries that are national in scope1 such as the manufacture of petroleum1 steel1 and tobacco1 would be carried on under national direction1 while those that supplied only a local market1 such as laundries1 bakeries1 and retail stores1 would be managed by the municipalities4 ,this division of control would be undoubtedly wise and necessary4 ,moreover1 the majority of ,socialists no longer demand that all tools and all industries should be brought under collective or governmental direction4 ,very small concerns which employed no hired labour1 or at most one or two persons1 could remain under private ownership and operation1 while even larger enterprises might be carried on by co-operative associations4#abi ,nevertheless the attempt to organise and operate collectively the industries of the country1 even with these limitations1 would encounter certain insuperable obstacles4 ,these will be considered under the general heads of inefficient industrial leadership1 inefficient labour1 and interference with individual liberty4 ,inefficient ,industrial ,leadership ,under ,socialism the boards of directors or commissions which exercised supreme control in the various industries1 would have to be chosen either by the general popular vote1 by the government1 or by the workers in each particular industry4 ,the first method may be at once excluded from consideration4 ,even now the number of officials chosen directly by the people is far too large2 hence the widespread agitation for the short ballot4 ,public opinion is coming to realise that the voters should be required to select only a few important officials1 whose qualifications should be general rather than technical1 and therefore easily recognised by the masses4 ,these supreme functionaries should have the power of filling all administrative offices1 and all positions demanding expert or technical ability4 ,if the task of choosing administrative experts cannot be safely left to the mass of the voters at present1 it certainly ought not to be assigned to them under ,socialism1 when the number and qualifications of these functionaries would be indefinitely increased4 ,if the boards of industrial directors were selected by the government1 that is1 by the national and municipal authorities1 the result would be industrial inefficiency and an intolerable bureaucracy4 ,no body of officials1 whether legislative or executive1 would possess the varied1 extensive1 and specific knowledge required to pick out efficient administrative commissions for all the industries of the country or the city4 ,and no group of political persons could safely be entrusted with such tremendous power4 ,it would enable them to dominate the industrial as well as the political life of the nation or the municipality1 to establish a bureaucracy that would be impregnable for a long period of years1 and to revive all the conceivable evils of governmental absolutism4 ,the third method is apparently the one now favoured by most ,socialists4 ,the workers in each industry may periodically select the managing authority1 says ,morris ,hillquit4#acj ,even if the workers were as able as the stockholders of a corporation to select an efficient governing board1 they would be much less likely to choose men who would insist on hard and efficient work from all subordinates4 ,the members of a private corporation have a strong pecuniary interest in selecting directors who will secure the maximum of product at the minimum of cost1 while the employs in a ,socialist industry would want managing authorities who were willing to make working conditions as easy as possible4 ,the dependence of the boards of directors upon the mass of the workers1 and the lack of adequate pecuniary motives1 would render their management much less efficient and progressive than that of private enterprises4 ,in the rules that they would make for the administration of the industry and the government of the labour force1 in their selection of subordinate officers1 such as superintendents1 general managers1 and foremen1 and in all the other details of management1 they would have always before them the abiding fact that their authority was derived from and dependent upon the votes of the majority of the employs4 ,their supreme consideration would be to conduct the industry in such a way as to satisfy the men who elected them4 ,hence they would strive to maintain an administration which would permit the mass of the labour force to work leisurely1 to be provided with the most expensive conditions of employment1 and to be immune from discharge except in rare and flagrant cases4 ,even if the members of the directing boards were sufficiently courageous or sufficiently conscientious to exact reasonable and efficient service from all their subordinates and all the workers1 they would not have the necessary pecuniary motives4 ,their salaries would be fixed by the government1 and in the nature of things could not be promptly adjusted to reward efficient and to punish inefficient management4 ,so long as their administration of industry maintained a certain routine level of mediocrity1 they would have no fear of being removed2 since they would be supervised and paid by public officials who would have neither the extraordinary capacity nor the necessary incentive to recognise and reward promptly efficient management1 they would lack the powerful stimulus which is provided by the hope of gain4 ,in the large private corporations1 the tenure of the boards of directors depends not upon the workers but upon the stockholders1 whose main interest is to obtain a maximum of product at a minimum of cost1 and who will employ and discharge1 reward and punish1 according as this end is attained4 ,moreover1 the members of the boards1 and the executive officers generally1 are themselves financially interested in the business and in the maintenance of the policy demanded by the other stockholders4 ,all the subordinate officers1 such as department managers1 superintendents1 foremen1 etc41 would exemplify the same absence of efficiency4 ,knowing that they must carry out the prudent policy of the board of directors1 they would be slow to punish shirking or to discharge incompetents4 ,realising that the board of directors lacked the incentive to make promotions promptly for efficient service1 or to discharge promptly for inefficient service1 they would devote their main energies to the task of holding their positions through a policy of indifferent and routine administration4 ,invention and progress would likewise suffer4 ,men who were capable of devising new machines1 new processes1 new methods of combining capital and labour1 would be slow to convert their potencies into action4 ,they would be painfully aware that the spirit of inertia and routine prevailing throughout the industrial and political organisation would prevent their efforts from receiving quick recognition and adequate rewards4 ,inventors of mechanical devices particularly would be deprived of the stimulus which they now find in the hope of indefinitely large gains4 ,boards of directors1 general managers1 and other persons exercising industrial authority would be very slow to introduce new and more efficient financial or technical methods when they had no certainty that they would receive adequate reward in the form of either promotion or money compensation4 ,they would see no sufficient reason for abandoning the established and pleasant policy of routine methods and unprogressive management4 ,inefficient ,labour ,the same spirit of inefficiency and mediocrity would permeate the rank and file of the workers4 ,indeed1 it would operate even more strongly among them than among the officers and superiors2 for their intellectual limitations and the nature of their tasks would make them less responsive to other than material and pecuniary motives4 ,they would desire to follow the line of least resistance1 to labour in the most pleasant conditions1 to reduce irksome toil to a minimum4 ,since the great bulk of their tasks would necessarily be mechanical and monotonous1 they would demand the shortest possible working day1 and the most leisurely rate of working speed4 ,and because of their numerical strength they would have the power to enforce this policy throughout the field of industry4 ,they would have the necessary and sufficient votes4 ,in a general way they might1 indeed1 realise that the practice of universal shirking and laziness must sooner or later result in such a diminution of the national product as to cause them great hardship1 but the workers in each industry would hope that those in all the others would be more efficient2 or doubt that a better example set by themselves would be imitated by the workers in other industries4 ,they would not be keen to give up the certainty of easy working conditions for the remote possibility of a larger national product4 ,attempted ,replies to ,objections ,all the attempts made by ,socialists to answer or explain away the foregoing difficulties may be reduced to two3 the achievements of government enterprises in our present system2 and the assumed efficacy of altruism and public honour in a rgime of ,socialism4 ,under the first head appeal is made to such publicly owned and managed concerns as the post office1 railroads1 telegraphs1 telephones1 street railways1 water works1 and lighting plants4 ,it is probably true that all these enterprises are on the whole carried on with better results to the public than if they were in private hands4 ,it is likewise probable that these and all other public utility monopolies will sooner or later be taken over by the ,state in all advanced countries4 ,even if this should prove in all cases to be a better arrangement from the viewpoint of the general public welfare than private ownership and management1 the fact would constitute no argument for a ,socialist organisation of all industry4 ,in the first place1 the efficiency of labour1 management1 and technical organisation is generally lower in public than in private enterprises1 and the cost of operation higher4 ,despite these defects1 government ownership of public utilities1 such as street railways and lighting concerns1 may be socially preferable because these industries are monopolies4 ,inasmuch as their charges and services cannot be regulated by the automatic action of competition1 the only alternative to public ownership is public supervision4 ,inasmuch as the latter is often incapable of securing satisfactory service at fair prices1 public ownership and management becomes on the whole more conducive to social welfare4 ,in other words1 the losses through inefficient operation are more than offset by the gains from better service and lower charges4 ,three cent fares and adequate service on an inefficiently managed municipal street railway are preferable to five cent fares on a privately owned street railway whose management is superior4 ,on the other hand1 all those industries which are not natural monopolies can be prevented from practising extortion upon the public through regulated competition4 ,in them1 therefore1 the advantages of private operation1 of which competition itself is not the least1 should be retained4 ,in the second place1 practically all the public service monopolies are simpler in structure1 more routine in operation1 and more mature in organisation and efficiency than the other industries4 ,the degree of managerial ability required1 the necessity of experimenting with new methods and processes1 and the opportunity of introducing further improvements in organisation are relatively less4 ,now1 it is precisely in these respects that private has shown itself superior to public operation4 ,initiative1 inventiveness1 and eagerness to effect economies and increase profits are the qualities in which private management excels4 ,when the nature and maturity of the concern have rendered these qualities relatively unimportant1 public management can exemplify a fair degree of efficiency4 ,in the third place1 the ability of the ,state to operate a few enterprises1 does not prove that it could repeat the performance with an equal degree of success in all industries4 ,i can drive two horses1 but ,i could not drive twenty-two4 ,no matter how scientific the organisation and departmentalisation of industries under ,socialism1 the final control of and responsibility for all of them would rest with one organ1 one authority1 namely1 the city in municipal industries1 and the nation in industries having national scope4 ,this would prove too great a task1 too heavy a burden1 for any body of officials1 for any group of human beings4 ,finally1 it must be kept in mind that the publicly operated utilities are subject continuously to the indirect competition of private management4 ,by far the greater part of industry is now under private control1 which sets the pace for efficient operation in a hundred particulars4 ,as a consequence1 comparisons are steadily provoked between public and private management1 and the former is subject to constant criticism4 ,the managers of the ,state concerns are stimulated and practically compelled to emulate the success of private management4 ,this factor is probably more effective in securing efficiency in public industries than all other causes put together4 ,in the words of ,professor ,skelton3 ,a limited degree of public ownership succeeds simply because it is a limited degree1 succeeds because private industry1 in individual forms or in the socialised joint stock form1 dominates the field as a whole4 ,it is private industry that provides the capital1 private industry that trains the men and tries out the methods1 private industry that sets the pace1 and--not the least of its services--private industry that provides the ever-possible outlet of escape4#aca ,the ,socialist expectation that altruistic sentiments and public honour would induce all industrial leaders and all ordinary workers to exert themselves as effectively as they now do for the sake of money1 is based upon the very shallow fallacy that what is true of a few men may very readily become true of all men4 ,there are1 indeed1 persons in every walk of life who work faithfully under the influence of the higher motives1 but they are and always have been the exceptions in their respective classes4 ,the great majority have been affected only feebly1 intermittently1 and on the whole ineffectively by either love of their kind or the hope of public approval4 ,a ,socialist order could generate no forces which would be as productive of unselfish conduct as the motives that are drawn from religion4 ,history shows nothing comparable either in extent or intensity to the record of self surrender and service to the neighbour which are due to the latter influence4 ,yet religion has never been able1 even in the periods and places most thoroughly dominated by ,christianity1 to induce more than a small minority of the population to adopt that life of altruism which would be required of the great majority under ,socialism4 ,moreover1 the efficacy of the higher motives is much greater among men devoted to scientific1 intellectual1 and religious pursuits than in either the leaders or the rank and file engaged in industrial occupations4 ,the cause of this difference is to be sought in the varying nature of the two classes of activity3 the first necessarily develops an appreciation of the higher goods1 the things of the mind and the soul2 the second compels the attention of men to rest upon matter1 upon the things that appeal to the senses1 upon the things that are measurable in terms of money4 ,there is a special fallacy underlying the emphasis placed by ,socialists on the power of public honour4 ,it consists in the failure to perceive that this good declines in efficacy according as the number of its recipients increases4 ,even if all the industrial population were willing to work as hard for public approval as they now do for money1 the results expected by ,socialists would not be forthcoming4 ,public recognition of unselfish service is now available in relatively great measure because the persons qualifying for it are relatively few4 ,they easily stand out conspicuous among their fellows4 ,let their numbers vastly increase1 and unselfishness would become commonplace4 ,it would no longer command popular recognition1 save in those who displayed it in exceptional or heroic measure4 ,the public would not have the time nor take the trouble to notice and honour adequately every floor walker1 retail clerk1 factory operative1 street cleaner1 agricultural labourer1 ditch digger1 etc41 who might become a candidate for such recognition4 ,when the ,socialists point to such examples of disinterested public service as that of ,colonel ,goethals in building the ,panama ,canal1 they confound the exceptional with the average4 ,they assume that1 since an exceptional man performs an exceptional task from high motives1 all men can be got to act likewise in all kinds of operations4 ,they forget that the ,panama ,canal presented opportunities of self satisfying achievement and fame which do not occur once in a thousand years2 that the traditions and training of the army have during many centuries deliberately and consistently aimed and tended to produce an exceptionally high standard of honour and disinterestedness2 that1 even so1 the majority of army officers have not in their civil assignments shown the same degree of faithfulness to the public welfare as ,colonel ,goethals2 that the ,canal was built under a rgime of benevolent despotism1 which placed no reliance upon the social mindedness of the subordinate workers2 and that the latter1 far from showing any desire to qualify as altruists or public benefactors1 demanded and received material recognition in the form of wages1 perquisites1 and gratuities which greatly surpassed the remuneration received by any other labour force in history4#acb ,in a word1 wherever in the construction of the ,canal notable disinterestedness or appreciation of public honour was shown1 the circumstances were exceptional2 where the situation was ordinary1 the ,canal builders were unable to rise above the ordinary motives of selfish advantage4 ,beneath all the ,socialist argument on this subject lies the assumption that the attitude of the average man toward the higher motives can by some mysterious process be completely revolutionised4 ,this is contrary to all experience1 and to all reasonable probability4 ,only a small minority of men have ever1 in any society or environment1 been dominated mainly by altruism or the desire of public honour4 ,what reason is there to expect that men will act differently in the future8 ,neither legislation nor education can make men love their neighbours more than themselves1 or love the applause of their neighbours more than their own material welfare4 ,restricting ,individual ,liberty ,even though human nature should undergo the degree of miraculous transformation necessary to maintain an efficient industrial system on ,socialist lines1 such a social organisation must soon collapse because of its injurious effect upon individual liberty4 ,freedom of choice would be abolished in the most vital economic transactions2 for there would be but one buyer of labour1 and one seller of commodities4 ,and these two would be identical1 namely1 the ,state4 ,with the exception of the small minority that might be engaged in purely individual avocations1 and in co-operative enterprises1 men would be compelled to sell their labour to either the municipality or the national government4 ,as competition between these two political agencies in the matter of wages and other conditions of labour could not be permitted1 there would be virtually only one employer4 ,practically all material goods would have to be purchased from either the municipal or the national shops and stores4 ,since the city and the nation would produce different kinds of goods1 the purchaser of any given article would be compelled to deal with one seller4 ,his freedom of choice would be further restricted by the fact that he would have to be content with those kinds and grades of commodities which the seller saw fit to produce4 ,he could not create an effective demand for new forms and varieties of goods1 as he now does1 by stimulating the ingenuity and acquisitiveness of competing producers and dealers4 ,prices and wages would1 of course1 be fixed beforehand by the government4 ,the supposition that this function might be left to the workers in each industry is utterly impracticable4 ,such an arrangement would involve a grand scramble among the different industries to see which could pay its own members the highest wages1 and charge its neighbours' members the highest prices4 ,the final result would be a level of prices so high that only an alert and vigorous section of the workers in each industry could find employment4 ,not only wages and prices but hours1 safety requirements1 and all the other general conditions of employment1 would be regulated by the government4 ,the individuals in each industry could not be permitted to determine these matters any more than they could be permitted to determine wages4 ,moreover1 all these regulations would from the nature of the case continue unchanged for a considerable period of time4 ,the restriction of choice enforced upon the sellers of labour and the buyers of goods1 the utter dependence of the population upon one agency in all the affairs of their economic as well as their political life1 the tremendous social power concentrated in the ,state1 would produce a diminution of individual liberty and a perfection of political despotism surpassing anything that the world has ever seen4 ,it would not long be tolerated by any self respecting people4 ,to reply that the ,socialist order would be a democracy1 and that the people could vote out of existence any distasteful regulation1 is to play with words4 ,no matter how responsive the governing and managing authorities might be to the popular will1 the dependence of the individual would prove intolerable4 ,not the manner in which this tremendous social power is constituted1 nor the personnel of those exercising it1 but the fact that so much power is lodged in one agency1 and so little immediate control of his affairs left to the individual1--is the heart of the evil situation4 ,in a word1 it is a question of the liberty of the individual versus the all pervading control of his actions by an agency other than himself4 ,moreover1 the people in a democracy means a majority1 or a compact minority4 ,under ,socialism the controlling section of the voting population would possess so much power1 political and economic1 that it could impose whatever conditions it pleased upon the non-controlling section for an almost indefinite period of time4 ,the members of the latter part of the population would not only be deprived of that immediate liberty which consists in the power to determine the details of their economic life1 but of that remote liberty which consists in the power to affect general conditions by their votes4 ,in the last chapter we saw that the claim to the full product of industry1 made on behalf of labour by the ,socialists1 cannot be established on intrinsic grounds4 ,like all other claims to material goods1 it is valid only if it can be realised consistently with human welfare4 ,its validity depends upon its feasibility1 upon the possibility of constructing some social system that will enable it to work4 ,the present chapter has shown that the requirements of such a system are not met by ,socialism4 ,a ,socialist organisation of industry would make all sections of the population1 including the wage earning class1 worse off than they are in the existing industrial order4 ,consequently1 neither the private ownership of capital nor the individual receipt of interest can be proved to be immoral by the ,socialist argument4 ,since private ownership and management of capital are superior to ,socialism1 the ,state is obliged to maintain1 protect1 and improve the existing industrial system4 ,this is precisely the conclusion that we reached in chapter iv with reference to private ownership of land4 ,in chapter v we found1 moreover1 that individual ownership of land is a natural right4 ,the fundamental considerations there examined lead to the parallel conclusion that the individual has a natural right to own capital4 ,but we could not immediately deduce from the right to own land the right to take rent4 ,neither can we immediately deduce from the right to own capital the right to take interest4 ,the positive establishment of the latter right will occupy us in the two following chapters4 ,,footnotes3 #aba ,wilhelm ,liebknecht1 cited in ,hillquit's ,socialism in ,theory and ,practice1 p4 #ajg4 #abb ,das ,erfurter ,program1 cited by ,skelton1 op4 cit41 p4 #agh4 #abc ,cf4 ,skelton1 op4 cit41 ch4 vii2 ,bernstein1 ,evolutionary ,socialism1 pp4 #a-id2 ,simkhovitch1 ,marxism vs4 ,socialism1 passim2 ,walling1 ,progressivism and ,after1 passim2 ,hillquit-,ryan1 op4 cit41 ch4 iv4 #abd ,income1 p4 #aeb4 #abe ,the ,wealth and ,income of the ,people of the ,united ,states1 p4 #acb4 #abf ,cf4 ,hillquit-,ryan1 op4 cit41 pp4 #ajg1 #acf4 #abg ,cf4 ,hillquit-,ryan1 op4 cit41 pp4 #gc-gg2 ,skelton1 op4 cit1 p4 #ahc2 ,walling1 ,socialism as ,it ,is1 p4 #dbi4 #abh ,cf4 ,king1 op4 cit41 pp4 #bbd-bbf4 #abi ,cf4 ,kautsky1 ,the ,social ,revolution1 pp4 #aff1 #afg2 ,hillquit-,ryan1 op4 cit41 p4 #gb4 #acj ,hillquit-,ryan1 op4 cit41 p4 #hj2 cf4 ,spargo1 ,socialism1 pp4 #bbe-bbg4 #aca ,socialism3 ,a ,critical ,analysis1 p4 #bai4 #acb ,cf4 ,the ,panama ,gateway1 by ,joseph ,bucklin ,bishop1 p4 #bfc4 ,,chapter ,,xii ,,alleged ,,intrinsic ,,justifications ,,of ,,interest ,in his address as ,president of the ,american ,sociological ,society at the annual meeting1 ,dec4 #bg1 #aiac1 ,professor ,albion ,w4 ,small denounced the fallacy of treating capital as though it were an active agent in human processes1 and crediting income to the personal representatives of capital1 irrespective of their actual share in human service4 ,according to his explicit declaration1 his criticism of the modern interest-system was based primarily upon grounds of social utility rather than upon formally ethical considerations4 ,a ,german priest has attacked interest from the purely moral viewpoint4#acc ,in his view the owner of any sort of capital who exacts the return of anything beyond the principal1 violates strict justice4#acd ,the ,church1 he maintains1 has never formally authorised or permitted interest1 either on loans or on producing capital4 ,she has merely tolerated it as an irremovable evil4 ,is there a satisfactory justification of interest8 ,if there is1 does it rest on individual or on social grounds8 ,that is to say3 is interest justified immediately and intrinsically by the relations existing between the owner and the user of capital8 ,or1 is rendered morally good owing to its effects upon social welfare8 ,let us see what light is thrown on these questions by the anti-usury legislation of the ,catholic ,church4 ,attitude of the ,church ,toward ,interest on ,loans ,during the ,middle ,ages all interest on loans was forbidden under severe penalties by repeated ordinances of ,popes and ,councils4#ace ,since the end of the seventeenth century the ,church has quite generally permitted interest on one or more extrinsic grounds1 or titles4 ,the first of these titles was known as lucrum cessans1 or relinquished gain4 ,it came into existence whenever a person who could have invested his money in a productive object1 for example1 a house1 a farm1 or a mercantile enterprise1 decided instead to lend the money4 ,in such cases the interest on the loan was regarded as proper compensation for the gain which the owner might have obtained from an investment on his own account4 ,the title created by this situation was called extrinsic because it arose out of circumstances external to the essential relations of borrower and lender4 ,not because of the loan itself1 but because the loan prevented the lender from investing his money in a productive enterprise1 was interest on the former held to be justified4 ,in other words1 interest on the loan was looked upon as merely the fair equivalent of the interest that might have been obtained on the investment4 ,during the seventeenth1 eighteenth1 and nineteenth centuries1 another title or justification of loan-interest found some favour among ,catholic moralists4 ,this was the praemium legale1 or legal rate of interest allowed by civil governments4 ,wherever the ,state authorised a definite rate of interest1 the lender might1 according to these writers1 take advantage of it with a clear conscience4 ,to-day the majority of ,catholic authorities on the subject prefer the title of virtual productivity as a justification4 ,money1 they contend1 has become virtually productive4 ,it can readily be exchanged for income-bearing or productive property1 such as1 land1 houses1 railroads1 machinery1 and distributive establishments4 ,hence it has become the economic equivalent of productive capital1 and the interest which is received on it through a loan is quite as reasonable as the annual return to the owner of productive capital4 ,between this theory and the theory connected with lucrum cessans the only difference is that the former shifts the justification of interest from the circumstances and rights of the lender to the present nature of the money itself4 ,not merely the fact that the individual will suffer if1 instead of investing his money he loans it without interest1 but the fact that money is generally and virtually productive1 is the important element in the newer theory4 ,in practice1 however1 the two explanations or justifications come to substantially the same thing4 ,nevertheless1 the ,church has given no positive approval to any of the foregoing theories4 ,in the last formal pronouncement by a ,pope on the subject1 ,benedict ,,xiv#acf condemned anew all interest that had no other support than the intrinsic conditions of the loan itself4 ,at the same time1 he declared that he had no intention of denying the lawfulness of interest which was received in virtue of the title of lucrum cessans1 nor the lawfulness of interest or profits arising out of investments in productive property4 ,in other words1 the authorisation that he gave to both kinds of interest was merely negative4 ,he refrained from condemning them4 ,in the ,responses given by the ,roman ,congregations from #ahbb onward to questions relating to the lawfulness of loan-interest1 we may profitably consider four principal features4 ,first1 they declare more or less specifically that interest may be taken in the absence of the title of lucrum cessans2 second1 some of them definitely admit the title of praemium legale1 or civil authorisation1 as sufficient to give the practice moral sanction2 third1 they express a genuine permission1 not a mere toleration1 of interest taking2 fourth1 none of them explicitly declares that any of the titles or reasons for receiving loan-interest will necessarily or always give the lender a strict right thereto4 ,none of them contains a positive and reasoned approval of the practice4 ,most of them merely decide that persons who engage in it are not to be disturbed in conscience1 so long as they stand ready to submit to a formal decision on the subject by the ,holy ,see4 ,the insertion of the latter condition clearly intimates that some day interest taking might be formally and officially condemned4 ,should such a condemnation ever appear1 it would not contradict any moral principle contained in the ,roman ,responses1 nor in the present attitude of the ,church and of ,catholic moralists4 ,undoubtedly it could come only as the result of a change in the organisation of industry1 just as the existing ecclesiastical attitude has followed the changed economic conditions since the ,middle ,ages4 ,all the theological discussion on the subject1 and all the authoritative ecclesiastical declarations indicate1 therefore1 that interest on loans is to-day regarded as lawful because a loan is the economic equivalent of an investment4 ,evidently this is good logic and common sense4 ,if it is right for the stockholder of a railway to receive dividends1 it is equally right for the bondholder to receive interest4 ,if it is right for a merchant to take from the gross returns of his business a sum sufficient to cover interest on his capital1 it is equally right for the man from whom he has borrowed money for the enterprise to exact interest4 ,the money in a loan is economically equivalent to1 convertible into1 concrete capital4 ,it deserves1 therefore1 the same treatment and the same rewards4 ,the fact that the investor undergoes a greater risk than the lender1 and the fact that the former often performs labour in connection with the operation of his capital1 have no bearing on the moral problem2 for the investor is repaid for his extra risk and labour by the profits which he receives1 and which the lender does not receive4 ,as a mere recipient of interest1 the investor undergoes no more risk nor exertion than does the lender4 ,his claim to interest is no better than that of the latter4 ,interest on ,productive ,capital ,on what ground does the ,church or ,catholic theological opinion justify interest on invested capital8 on the shares of the stockholders in corporations8 on the capital of the merchant and the manufacturer8 ,in the early ,middle ,ages the only recognised titles to gain from the ownership of property were labour and risk4#acg ,down to the beginning of the fifteenth century substantially all the incomes of all classes could be explained and justified by one or other of these two titles2 for the amount of capital in existence was inconsiderable1 and the number of large personal incomes insignificant4 ,when1 however1 the traffic in rent charges and the operation of partnerships1 especially the contractus trinus1 or triple contract1 had become fairly common1 it was obvious that the profits from these practices could not be correctly attributed to either labour or risk4 ,the person who bought1 not the land itself1 but the right to receive a portion of the rent thereof1 and the person who became the silent member of a partnership1 evidently performed no labour beyond that involved in making the contract4 ,and their profits clearly exceeded a fair compensation for their risks1 inasmuch as the profits produced a steady income4 ,how then were they to be justified8 ,a few authorities maintained that such incomes had no justification4 ,in the thirteenth century ,henry of ,ghent condemned the traffic in rent charges2 in the sixteenth ,dominicus ,soto maintained that the returns to the silent partner in an enterprise ought not to exceed a fair equivalent for his risks2 about the same time ,pope ,sixtus ,v denounced the triple contract as a form of usury4 ,nevertheless1 the great majority of writers admitted that all these transactions were morally lawful1 and the gains therefrom just4 ,for a time these writers employed merely negative and a pari arguments4 ,gains from rent charges1 they pointed out1 were essentially as licit as the net rent received by the owner of the land2 and the interest received by a silent partner1 even in a triple contract1 had quite as sound a moral basis as rent charges4 ,by the beginning of the seventeenth century the leading authorities were basing their defence of industrial interest on positive grounds4 ,lugo1 ,lessius1 and ,molina adduced the productivity of capital goods as a reason for allowing gains to the investor4 ,whether they regarded productivity as in itself a sufficient justification of interest1 or merely as a necessary prerequisite to justification1 cannot be determined with certainty4 ,at present the majority of ,catholic writers seem to think that a formal defence of interest on capital is unnecessary4 ,apparently they assume that interest is justified by the mere productivity of capital4 ,however1 this view has never been explicitly approved by the ,church4 ,while she permits and authorises interest1 she does not define its precise moral basis4 ,so much for the teaching of ecclesiastical and ethical authorities4 ,what are the objective reasons in favour of the capitalist's claim to interest8 ,in this chapter we consider only the intrinsic reasons1 those arising wholly out of the relations between the interest-receiver and the interest-payer4 ,before taking up the subject it may be well to point out the source from which interest comes1 the class in the community that pays the interest to the capitalist4 ,from the language sometimes used by ,socialists it might be inferred that interest is taken from the labourer1 and that if it were abolished he would be the chief if not the only beneficiary4 ,this is incorrect4 ,at any given time interest on producing capital is paid by the consumer4 ,those who purchase the products of industry must give prices sufficiently high to provide interest in addition to the other expenses of production4 ,were interest abolished and the present system of private capital continued1 the gain would be mainly reaped by the consumer in the form of lower prices2 for the various capitalist directors of industry would bring about this result through their competitive efforts to increase sales4 ,only those labourers who were sufficiently organised and sufficiently alert to make effective demands for higher wages before the movement toward lower prices had got well under way1 would obtain any direct benefit from the change4 ,the great majority of labourers would gain far more as consumers than as wage earners4 ,speaking generally1 then1 we may say that the capitalist's gain is the consumer's loss1 and the question of the justice of interest is a question between the capitalist and the consumer4 ,the intrinsic or individual grounds upon which the capitalist's claim to interest has been defended are mainly three3 productivity1 service1 and abstinence4 ,they will be considered in this order4 ,the ,claims of ,productivity ,it is sometimes asserted that the capitalist has as good a right to interest as the farmer has to the offspring of his animals4 ,both are the products of the owner's property4 ,in two respects1 however1 the comparison is inadequate and misleading4 ,since the owner of a female animal contributes labour or money or both toward her care during the period of gestation1 his claim to the offspring is based in part upon these grounds1 and only in part upon the title of interest4 ,in the second place1 the offspring is the definite and easily distinguishable product of its parent4 ,but the sixty dollars derived as interest from the ownership of ten shares of railway stock1 cannot be identified as the exact product of one thousand dollars of railway property4 ,no man can tell whether this amount of capital has contributed more or less than sixty dollars of value to the joint product1 i4e41 railway services4 ,the same is true of any other share or piece of concrete capital4 ,all that we know is that the interest1 be it five1 six1 seven1 or some other per cent41 describes the share of the product which goes to the owner of capital in the present conditions of industry4 ,it is the conventional not the actual and physical product of capital4 ,another faulty analogy is that drawn between the productivity of capital and the productivity of labour4 ,following the terminology of the economists1 most persons think of land1 labour1 and capital as productive in the same sense4 ,hence the productivity of capital is easily assumed to have the same moral value as the productive action of human beings2 and the right of the capitalist to a part of the product is put on the same moral basis as the right of the labourer4 ,yet the differences between the two kinds of productivity1 and between the two moral claims to the product are more important than their resemblances4 ,in the first place1 there is an essential physical difference4 ,as an instrument of production1 labour is active1 capital is passive4 ,as regards its worth or dignity1 labour is the expenditure of human energy1 the output of a person1 while capital is a material thing1 standing apart from a personality1 and possessing no human quality or human worth4 ,these significant intrinsic or physical differences forbid any immediate inference that the moral claims of the owners of capital and labour are equally valid4 ,we should logically expect to find that their moral claims are unequal4 ,this expectation is realised when we examine the bearing of the two kinds of productivity upon human welfare4 ,in the exercise of productive effort the average labourer undergoes a sacrifice4 ,he is engaged in a process that is ordinarily irksome4 ,to require from him this toilsome expenditure of energy without compensation1 would make him a mere instrument of his fellows4 ,it would subordinate him and his comfort to the aggrandisement of beings who are not his superiors but his moral equals4 ,for he is a person2 they are no more than persons4 ,on the other hand1 the capitalist as such1 as the recipient of interest1 performs no labour1 painful or otherwise4 ,not the capitalist1 but capital participates in the productive process4 ,even though the capitalist should receive no interest1 the productive functioning of capital would not subordinate him to his fellows in the way that wageless labour would subordinate the labourer4 ,the precise and fundamental reason for according to the labourer his product is that this is the only rational rule of distribution4 ,when a man makes a useful thing out of materials that are his1 he has a strict right to the product simply because there is no other reasonable method of distributing the goods and opportunities of the earth4 ,if another individual1 or society1 were permitted to take this product1 industry would be discouraged1 idleness fostered1 and reasonable life and self development rendered impossible4 ,direful consequences of this magnitude would not follow the abolition of interest4 ,perhaps the most important difference between the moral claims of capitalist and labourer is the fact that for the latter labour is the sole means of livelihood4 ,unless he is compensated for his product he will perish4 ,but the capitalist has in addition to the interest that he receives the ability to work4 ,were interest abolished he would still be in as good a position as the labourer4 ,the product of the labourer means to him the necessaries of life2 the product of the capitalist means to him goods in excess of a mere livelihood4 ,consequently their claims to the product are greatly unequal in vital importance and moral value4 ,the foregoing considerations show that even the claim of the labourer to his product is not based upon merely intrinsic grounds4 ,it does not spring entirely from the mere fact that he has produced the product1 from the mere relation between producer and thing produced4 ,if this is true of labour-productivity we should expect to find it even more evident with regard to the productivity of capital2 for the latter is passive instead of active1 non rational instead of human4 ,the expectation is well founded4 ,not a single conclusive argument can be brought forward to show that the productivity of capital directly and necessarily confers upon the capitalist a right to the interest-product4 ,all the attempted arguments are reducible to two formulas3 res fructificat domino 7a thing fructifies to its owner7 and the effect follows its cause4 ,the first of these was originally a legal rather than an ethical maxim2 a rule by which the title was determined in the civil law1 not a principle by which the right was determined in morals4 ,the second is an irrelevant platitude4 ,as a juristic principle1 neither is self evident4 ,why should the owner of a piece of capital1 be it a house1 a machine1 or a share of railway stock1 have a right to its product1 when he has expended neither time1 labour1 money1 nor inconvenience of any kind8 ,to answer1 because the thing which produced the product belongs to him1 is merely to beg the question4 ,to answer1 because the effect follows the cause1 is to make a statement which has nothing to do with the question4 ,what we want to know is why the ownership of a productive thing gives a right to the product2 why this particular effect should follow its cause in this particular way4 ,to answer by repeating under the guise of sententious formulas the thesis to be proved1 is scarcely satisfactory or convincing4 ,to answer that if the capitalist were not given interest industry and thrift would decrease and human welfare suffer1 is to abandon the intrinsic argument entirely4 ,it brings in the extrinsic consideration of social consequences4 ,the ,claims of ,service ,the second intrinsic ground upon which interest is defended1 is the service performed by the capitalist when he permits his capital to be used in production4 ,without capital1 labourers and consumers would be unable to command more than a fraction of their present means of livelihood4 ,from this point of view we see that the service in question is worth all that is paid in the form of interest4 ,nevertheless it does not follow that the capitalist has a claim in strict justice to any payment for this service4 ,according to ,st4 ,thomas1 a seller may not charge a buyer an extra amount merely because of the extra value attached to the commodity by the latter4#ach ,in other words1 a man cannot justly be required to pay an unusual price for a benefit or advantage or service1 when the seller undergoes no unusual deprivation4 ,father ,lehmkuhl carries the principle further1 and declares that the seller has a right to compensation only when and to the extent that he undergoes a privation or undertakes a responsibility4#aci ,according to this rule1 the capitalist would have no right to interest2 for as mere interest-receiver he undergoes no privation4 ,his risk and labour are remunerated in profits1 while the responsibility of not withdrawing from production something that can continue in existence only by continuing in production1 is scarcely deserving of a reward according to the canons of strict justice4 ,whatever we may think of this argument from authority1 we find it impossible to prove objectively that a man who renders a service to another has an intrinsic right to anything beyond compensation for the expenditure of money or labour involved in performing the service4 ,the man who throws a life preserver to a drowning person may justly demand a payment for his trouble4 ,on any recognised basis of compensation1 this payment will not exceed a few dollars4 ,yet the man whose life is in danger would pay a million dollars for this service if he were extremely rich4 ,he would regard the service as worth this much to him4 ,has the man with the life preserver a right to exact such a payment8 ,has he a right to demand the full value of the service8 ,no reasonable person would answer this question otherwise than in the negative4 ,if the performer of the service may not charge the full value thereof1 as measured by the estimate put upon it by the recipient1 it would seem that he ought not to demand anything in excess of a fair price for his trouble4 ,in other words1 he may not justly exact anything for the service as such4 ,it would seem1 then1 that the capitalist has no moral claim to pure interest on the mere ground that the use of his capital in production constitutes a service to labourers and consumers4 ,it would seem that he has no right to demand a payment for a costless service4 ,the ,claims of ,abstinence ,the third and last of the intrinsic justifications of interest that we shall consider is abstinence4 ,this argument is based upon the contention that the person who saves his money1 and invests it in the instruments of production undergoes a sacrifice in deferring to the future satisfactions that he might enjoy to-day4 ,one hundred dollars now is worth as much as one hundred and five dollars a year hence4 ,that is1 when both are estimated from the viewpoint of the present4 ,this sacrifice of present to future enjoyment which contributes a service to the community in the form of capital1 creates a just claim upon the community to compensation in the form of interest4 ,if the capitalist is not rewarded for this inconvenience he is1 like the unpaid labourer1 subordinated to the aggrandisement of his fellows4 ,against this argument we may place the extreme refutation attempted by the ,socialist leader1 ,ferdinand ,lassalle3 ,but the profit of capital is the reward of abstinence4 ,truly a happy phrase6 ,european millionaires are ascetics1 ,indian penitents1 modern ,st4 ,simons ,stylites1 who perched on their columns1 with withered features and arms and bodies thrust forward1 hold out a plate to the passers-by that they may receive the wages of their privations6 ,in the midst of this sacro-saint group1 high above his fellow-mortifiers of the flesh1 stands the ,holy ,house of ,rothschild4 ,that is the real truth about our present society6 ,how could ,i have hitherto blundered on this point as ,i have8#adj ,obviously this is a malevolently one-sided implication concerning the sources of capital4 ,but it is scarcely less adequate than the explanation in opposition to which it has been quoted4 ,both fail to distinguish between the different kinds of savers1 the different kinds of capital-owners4 ,for the purposes of our inquiry savings may be divided into three classes4 ,first1 those which are accumulated and invested automatically4 ,very rich persons save a great deal of money that they have no desire to spend1 since they have already satisfied or safeguarded all the wants of which they are conscious4 ,evidently this kind of saving involves no real sacrifice4 ,to it the words of ,lassalle are substantially applicable1 and the claim to interest for abstinence decidedly inapplicable4 ,second1 savings to provide for old age and other future contingencies which are estimated as more important than any of the purposes for which the money might now be expended4 ,were interest abolished this kind of saving would be even greater than it is at present2 for a larger total would be required to equal the fund that is now provided through the addition of interest to the principal4 ,in a no-interest rgime one thousand dollars would have to be set aside every year in order to total twenty thousand dollars in twenty years2 when interest is accumulated on the savings1 a smaller annual amount will suffice to produce the same fund4 ,inasmuch as this class of persons would save in an even greater degree without interest1 it is clear that they regard the sacrifice involved as fully compensated in the resulting provision for the future4 ,in their case sacrifice is amply rewarded by accumulation4 ,their claim to additional compensation in the form of interest does not seem to have any valid basis4 ,in the words of the late ,professor ,devas1 there is ample reward given without any need of any interest or dividend4 ,for the workers with heads or hands keep the property intact1 ready for the owner to consume whenever convenient1 when he gets infirm or sick1 or when his children have grown up1 and can enjoy the property with him4#ada ,the third kind of saving is that which is made by persons who could spend1 and have some desire to spend1 more on present satisfactions1 and who have already provided for all future wants in accordance with the standards of necessaries and comforts that they have adopted4 ,their fund for the future is already sufficient to meet all those needs which seem weightier than their present unsatisfied wants4 ,if the surplus in question is saved it will go to supply future desires which are no more important than those for which it might be expended now4 ,in other words1 the alternatives before the prospective saver are to procure a given amount of satisfaction to-day1 or to defer the same degree of satisfaction to a distant day4 ,in this case the inducement of interest will undoubtedly be necessary to bring about saving4 ,as between equal amounts of satisfaction at different times1 the average person will certainly prefer those of the present to those of the future4 ,he will not decide in favour of the future unless the satisfactions then obtainable are to be greater in quantity4 ,to this situation the rule that deferred enjoyments are worth less than present enjoyments1 is strictly applicable4 ,the increased quantity of future satisfaction which is necessary to turn the choice from the present to the future1 and to determine that the surplus shall be saved rather than spent1 can be provided only through interest4 ,in this way the accumulations of interest and savings will make the future fund equivalent to a larger amount of enjoyment or utility than could be obtained if the surplus were exchanged for the goods of the present4 ,interest magnifies the distant object4 ,whenever this magnifying power seems sufficiently great to outweigh the advantage of present over future satisfactions1 the surplus will be saved instead of spent4 ,among the well-to-do there is probably a considerable number of persons who take this attitude toward a considerable part of their savings4 ,since they would not make these savings without the inducement of interest1 they regard the latter as a necessary compensation for the sacrifice of postponed enjoyment4 ,in a general way we may say that they have a strict right to this interest on the intrinsic ground of sacrifice4 ,inasmuch as the community benefits by the savings1 it may quite as fairly be required to pay for the antecedent sacrifices of the savers as for the inconvenience undergone by the performer of any useful labour or service4 ,summing up the matter regarding the intrinsic justification of interest1 we find that the titles of productivity and service do not conclusively establish the strict right of the capitalist to interest1 and that the title of abstinence is morally valid for only a portion1 probably a rather small portion1 of the total amount of interest now received by the owners of capital4 ,consequently interest as a whole is not conclusively vindicated on individual grounds4 ,if it is to be proved morally lawful its justification must be sought in extrinsic and social considerations4 ,this inquiry will form the subject of the next chapter4 ,,footnotes3 #acc ,hohoff1 ,die ,bedeutung der ,marxschen ,kapitalkritik2 ,paderborn1 #aijh4 #acd ,pp4 #fd-fg1 #hh1 #hi1 #if4 #ace ,cf4 ,van ,roey1 ,de ,justo ,auctario ex ,contractu ,crediti2 and ,ashley1 ,english ,economic ,history4 #acf ,encyclical1 ,vix ,pervenit1 #agde4 #acg ,cf4 ,st4 ,thomas1 ,summa ,theologica1 #b;a #b;ae1 q4 #gh1 a4 #b et #c4 #ach ,secunda ,secondae1 q4 #gg1 a4 #a1 in corp4 #aci ,theologia ,moralis1 ,i1 no4 #ajej4 #adj ,what is ,capital8 p4 #bg4 #ada ,political ,economy1 p4 #ejg4 ,,chapter ,,xiii ,,social ,,and ,,presumptive ,,justifications ,,of ,,interest ,as we saw in the last chapter1 interest cannot be conclusively justified on the ground of either productivity or service4 ,it is impossible to demonstrate that the capitalist has a strict right to interest because his capital produces interest1 or because it renders a service to the labourer or the consumer4 ,a part1 probably a small part1 of the interest now received can be fairly justified by the title of sacrifice4 ,some present owners of capital would not have saved had they not expected to receive interest4 ,in their case interest may be regarded as a just compensation for the sacrifice that they underwent when they decided to save instead of consuming4 ,limitations of the ,sacrifice ,principle ,nevertheless these men would suffer no injustice if interest were now to be abolished4 ,up to the moment of the change1 they would have been in receipt of adequate compensation2 thereafter1 they would be in exactly the same position as when they originally chose to save rather than consume4 ,they would still be able to sell their capital1 and convert the proceeds to their immediate uses and pleasures4 ,in this case they would obviously have no further claim upon the community for interest4 ,on the other hand1 they could retain the ownership of their capital1 and postpone its consumption to some future time4 ,in making this choice they would regard future as more important than present consumption1 and the superiority of future enjoyment as sufficiently great to compensate them for the sacrifice of postponement4 ,hence they would have no moral claim to interest on the ground of abstinence4 ,in general1 then1 the sacrifice-justification of interest continues only so long as the interest continues4 ,it extends only to the interest received by certain capitalists in certain circumstances1 not to all interest in all circumstances4 ,therefore1 it presents no moral obstacle to the complete abolition of interest4 ,since probably the greater part of the interest now received cannot be justified on intrinsic grounds1 and since that part of it which is thus justified could be abolished consistently with the rights of the recipients1 let us see whether it is capable of justification for reasons of social welfare4 ,would its suppression be socially beneficial or socially detrimental8 ,the ,value of ,capital in a ,no-,interest ,rgime ,the interest that we have in mind is pure interest1 not undertaker's profit1 nor insurance against risk1 nor gross interest4 ,even if all pure interest were abolished the capitalist who loaned his money would still receive something from the borrower in addition to the repayment of the principal1 while the active capitalist would get from the consumer more than the expenses of production4 ,the former would require a premium of1 say1 one or two per cent4 to protect him against the loss of his loan4 ,the latter would demand the same kind of insurance1 and an additional sum to repay him for his labour and enterprise4 ,none of these payments could be avoided in any system of privately directed production4 ,the return whose suppression is considered here is that which the capitalist receives over and above these payments1 and which in this country seems to be about three or four per cent4 ,would capital still have value in a no-interest rgime1 and if so how would its value be determined8 ,at present the lower limit of the value of productive capital1 as of all other artificial goods1 is fixed in the long run by the cost of production4 ,capital instruments that do not bring this price will not continue to be made4 ,in other words1 cost of production is the governing factor of the value of capital from the side of supply4 ,it would likewise fix the lower limit of value in a no-interest rgime2 only1 the cost of producing capital instruments would then be somewhat lower than to-day1 owing to the absence of an interest charge for the working capital during the productive process4 ,but the cost of production is not a constant and accurate measure of the value of artificial capital4 ,the true measure is found in the revenue or interest that a given piece of capital yields to its owners4 ,if the current rate of interest is five per cent41 a factory that brings in ten thousand dollars net return will have a value of about two hundred thousand dollars4 ,this is the governing factor of value from the side of demand4 ,in a no-interest economy the demand factor would be quite different4 ,capital instruments would be in demand1 not as revenue producers1 but as the concrete embodiments1 the indispensable requisites of saving and accumulation4 ,for it is impossible that saving should in any considerable amount take the form of cash hoards4 ,in the words of ,sir ,robert ,giffen3 ,the accumulations of a single year1 even taking it at one hundred and fifty millions only1 444 would absorb more than the entire metallic currency of the country ,great ,britain4 ,they cannot1 therefore1 be made in cash4#adb ,the instruments of production would be sought and valued by savers for the same reason that safes and safety deposit boxes are in demand now4 ,they would be the only means of carrying savings into the future1 and they would necessarily bring a price sufficiently high to cover the cost of producing them4 ,one man might deposit his savings in a bank1 whence they would be borrowed without interest by some director of industry4 ,when the owner of the savings desired to recover them he could obtain from the bank the fund of some other depositor1 or get the proceeds of the sale of the concrete capital in which his own savings had been embodied4 ,another man might prefer to invest his savings directly in a building1 a machine1 or a mercantile business1 whence he could recover them later from the sale of the property4 ,hence the absence of interest would not change essentially the processes of saving or investment4 ,capital would still have value1 but its valuation from the demand side would rest on a different basis4 ,it would be valued not in proportion to its power to yield interest1 but because of its capacity to become a receptacle for savings1 and to carry into the future the consuming power of the present4 ,the question whether the abolition of interest by the ,state would be socially helpful or socially harmful is mainly1 though not entirely1 a question of the supply of capital4 ,if the community would not have sufficient capital to provide for all its needs1 actual and progressive1 the suppression of interest would obviously be a bad policy4 ,most economists seem inclined to think that this condition would be realised2 that1 without the inducement of interest1 men would neither make new savings nor conserve existing capital in sufficient quantity to supply the wants of society4 ,very few of them1 however1 pretend to be able to prove this proposition4 ,so many complex factors with regard to the possibilities of saving and the motives of savers1 enter into the situation that no opinion on the subject can have any stronger basis than probability4 ,as a preliminary to our consideration of the question of abolition1 let us inquire whether there exists any definite relation between the present supply of capital and the current rate of interest4 ,whether the ,present ,rate of ,interest ,is ,necessary ,it is sometimes contended that the interest rate must be kept up to the present level if the existing supply of capital is to be maintained4 ,the underlying assumption is that some of the present savers would discontinue that function at any lower rate1 with the consequence that the supply of capital would fall below the demand4 ,owing to this excess of demand over supply1 the rate of interest would rise1 or tend to rise1 to the former level4 ,therefore1 the rate existing at any given time is the socially necessary rate4 ,the rate of interest is said to be analogous to the rate of wages4 ,for example2 of ten thousand men receiving five dollars a day1 nine thousand may be willing to work for four dollars rather than quit their present jobs4 ,but the other thousand set their minimum price at five dollars4 ,if the wage is reduced to four dollars these men will get employment elsewhere1 thus causing such an excess of demand over supply as to force the wage rate back to five dollars4 ,the same thing1 it is contended1 will happen when the high-priced section of the savers1 the marginal savers1 discontinue saving on account of the artificial lowering of the rate of interest4 ,the analogy1 however1 is misleading4 ,the marginal one thousand wage earners refuse to work for four dollars a day because they can get better compensation in some other occupation4 ,this phenomenon has been proved over and over again by observation and experience4 ,on the other hand1 there is no experience1 no positive evidence1 which shows or tends to show that any necessary group of present savers would discontinue or materially reduce their accumulations if they were no longer able to secure the present rate of interest4 ,if the rate were lowered simultaneously in all civilised countries the dissatisfied savers1 unlike the dissatisfied labourers1 would not be able to get a better price for their capital elsewhere4 ,their only alternative would be to spend their actual or potential savings for present enjoyment4 ,now we have no empirical data to justify the assumption that any considerable number of savers would choose this alternative in preference to1 say1 three or two per cent4 interest4 ,the fact that any group of savers at present gets and insists on getting a higher rate1 merely proves that they can get it1 and that they are selfish enough to take advantage of the possibility4 ,we know that some men who now obtain six per cent4 interest would accept two rather than cease to save2 yet they do not hesitate to demand six per cent4 ,so far as we know1 all present savers might take the same attitude4 ,at any rate1 we can not conclude that they would not take less from the fact that they now get more4 ,why then does not the rate of interest fall8 ,if all present savers are getting a higher rate than is necessary to induce them to save1 why do they not increase their savings to such an extent that the supply of capital will exceed the present volume of demand1 and thus lead to a decline in the rate of interest8 ,this is what happens when the price of consumption-goods rises appreciably above the minimum level that satisfies the most high-priced or marginal producers4 ,there is1 however1 an important difference between the two cases4 ,the capacity to produce more goods is practically unlimited1 and the corresponding desire is also unlimited1 so long as the price of the product exceeds the cost of production4 ,the capacity to save is not unlimited1 and the desire to save is neutralised and sharply restricted by other and more powerful desires4 ,hence it is quite possible that the price of capital1 i4e41 interest1 is determined to only a slight degree by the cost of saving1 being mainly dominated and regulated from the side of demand4 ,even though many of the present savers and owners of capital should diminish or discontinue their functions on account of a fall in the rate of interest1 a reduction would not necessarily take place in the supply of capital4 ,the function of these marginal savers would in all probability be performed by other persons1 who would be compelled to increase their accumulations in order to provide as well for the future as they had previously been able to provide with a smaller capital at a higher rate of interest4#adc ,whether at ,least ,two ,per ,cent4 ,is ,necessary ,while admitting that the present rate is unnecessarily high1 ,professor ,cassel maintains that a certain important class of savers would diminish very considerably their accumulations if the interest rate should fall much below two per cent4 ,this class comprises those persons whose main object in saving is a fund which will some day support them from its interest4 ,at six per cent4 a person can accumulate in about twelve years a sum sufficient to provide him with an interest-income equal to the amount annually saved4 ,for example2 two thousand dollars put aside every year1 and subjected to compound interest1 will aggregate in twelve years a principal capable of yielding an annual income of two thousand dollars4 ,at two per cent4 the same amount of yearly saving will not lead to the same income in less than thirty-five years4 ,if the rate be one and one-half per cent41 forty-seven years will be required to produce the desired income4 ,hence1 concludes ,cassel1 if the rate falls below two per cent4 the average man will decide that life is too short to provide for the future by means of an interest-income1 and will expect to draw upon his principal4 ,this means that he will not need to save as much as when he sought to accumulate a capital large enough to support him out of its interest alone4 ,the argument is plausible but not conclusive4 ,if the rate of interest is so low that a man must save for forty-seven years in order to obtain a sufficient interest-income to support him in his declining years1 he will rarely attain that end4 ,in the great majority of instances men who are unable to save more annually than the amount that they will need each year in old age1 will expect and be compelled to use up a part or all of their capital in the period following the cessation of their economic usefulness4 ,nevertheless1 it does not follow that they will save less at one and one-half per cent4 than at six per cent4 ,the determining factor in the situation is the attitude of the saver toward the capital sum accumulated4 ,he either desires or does not desire to leave this behind him4 ,in the latter case he will save only as much as is necessary to provide an annual income composed partly of interest and partly of the principal4 ,if this contemplated income is two thousand dollars1 and the rate of interest is six per cent41 he will not need to save that much annually for as long a period as ten years4 ,he can diminish either the yearly amount saved or the length of time devoted to saving4 ,on the other hand1 if the rate is only one and one-half per cent4 he will be compelled to save a larger total in order to secure an equal accumulation and an equal provision for the future4 ,in all cases1 therefore1 in which the saving is carried on merely for the saver's own lifetime it will be increased instead of decreased by a low rate of interest4 ,if the saver does desire to bequeath his capital he will not always be deterred from this purpose merely because he is compelled to use some of the capital for the satisfaction of his own wants4 ,take the man who can save two thousand dollars a year1 and with the rate of interest at six per cent4 assure himself an interest-income of the same amount1 and who intends to leave the principal 7some thirty-three thousand dollars7 to his children4 ,should the rate fall to one and one-half per cent4 he would be unable to accumulate and bequeath nearly such a large sum4 ,surely this fact1 discouraging as it is1 will not determine him to save nothing4 ,he will not1 as ,cassel's argument assumes1 decide to leave nothing to his children1 and content himself with that amount of saving which will suffice to provide for his own future4 ,in all probability he will try to accumulate a sum which1 even when diminished by future deductions for his own wants1 will approximate as closely as possible the amount that he could have bequeathed had the rate remained at six per cent4 ,this means that he will save more at the low than at the high rate of interest4 ,the relative insignificance of the sum which would be saved at a low rate might sometimes1 indeed1 deter a person from saving for testamentary purposes4 ,with the rate at six per cent41 a man might be willing to save six hundred dollars a year for a sufficiently long period to provide a legacy of twenty thousand dollars to an educational institution4 ,with the rate at one and one-half per cent41 the amount that he could hope to accumulate would be so much smaller that it might seem to him not worth while1 and he would decline to save the six hundred dollars annually4 ,cases of this kind1 however1 always involve the secondary objects of saving1 the luxuries rather than the necessaries of testamentary transmission4 ,they do not include such primary objects as provision for one's family4 ,when the average man finds that he cannot leave to his family as much as he would desire1 as much as he would have bequeathed to them at a higher rate of interest1 he will strive to increase rather than decrease his efforts to save for this purpose4 ,speaking generally1 then1 we conclude that the assumption underlying ,professor ,cassel's theory is contradicted by our experience of human motives and practices4 ,men who save mainly for a future interest-income1 at the same time wishing to keep the principal intact until death1 and who could have fully realised this desire under a high interest rgime1 will not become entirely indifferent to it when they find that they cannot attain it completely4 ,they will ordinarily try to leave behind them as large a capital or principal as they can4 ,hence they will save more rather than less4 ,whether ,any ,interest ,is ,necessary ,perhaps the best known recent statement of the opinion that interest is inevitable1 appears in ,professor ,irving ,fisher's ,the ,rate of ,interest4#add ,while he does not assert explicitly that sufficient capital would not be provided without interest1 and even admits that in certain circumstances interest might disappear1 the general logic and implications of his argument are decidedly against the supposition that society could ever get along without interest4 ,he lays such stress upon the factor of impatience1 i4e41 man's unwillingness to wait for future goods1 as to suggest strongly that other causes of interest1 and the number of savers free from impatience1 are quite insignificant4 ,now1 if impatience were the only cause of interest the latter must continue as long as impatience continues2 and if practically all savers1 actual and possible1 are completely dominated by impatience the abolition of interest would be socially disastrous4 ,however1 neither of these assumptions is demonstrable4 ,we have just seen that the present rate of interest has other causes than impatience2 that a large proportion of savers insist upon getting the present rate1 not because they require it to offset their impatience1 but simply because they can obtain it1 and because they prefer it to the lower rate4 ,therefore1 the mere existence of the present rate does not prove it to be necessary4 ,by the same argument it is evident that the existence of any interest does not demonstrate the necessity of some interest4 ,in the second place1 the number of savers1 present and prospective1 whose impatience is so weak as to permit them to save without interest1 is probably greater than the average reader of ,professor ,fisher's pages is led to assume4 ,the question whether interest is necessary cannot be answered by reference to the general fact of human impatience2 it demands a preliminary analysis of the extent to which impatience affects the different classes of savers4 ,with interest abolished1 those persons who were willing to subordinate present secondary satisfactions to the primary future needs of themselves and their families1 would save at least as much for these purposes as when they could have obtained interest4 ,most of them would probably save more in order to render their future provision as nearly as possible equal to what it would have been had interest accrued on their annual savings4 ,whether a person intended to leave all his accumulations1 or part of them1 or none of them to posterity1 he would still desire them to be as large as they might have been in a rgime of interest4 ,in order to realise this desire1 he would be compelled to increase his savings4 ,and it is reasonable to expect that this is precisely the course that would be followed by men of average thrift and foresight4 ,such men regard future necessaries and comforts1 whether for themselves or their children1 as more important than present non-essentials and luxuries4 ,interest or no interest1 prudent men will subordinate the latter goods to the former1 and will save money accordingly4 ,when1 however1 both future and present goods are of the same order and importance1 the future is no longer preferred to the present4 ,in that case the preference is reversed4 ,the luxuries of to-day are more keenly prized than the luxuries of to-morrow4 ,if the latter are to be preferred they must possess some advantage over the luxuries that might be obtained here and now4 ,such advantage may arise in various ways2 for example1 when a man decides that he will have more leisure for a foreign journey two years hence than this year1 or when he prefers a large amount of future enjoyment at one time to present satisfactions taken in small doses4 ,but the most general method of conferring advantage upon the secondary satisfactions of the future as compared with those of the present1 is to increase the quantity4 ,the majority of foreseeing persons are willing to pass by one hundred dollars' worth of enjoyment now for the sake of one hundred and five dollars' worth one year hence4 ,this advantage of quantity is provided through the receipt of interest4 ,it affects all those persons whose saving1 as noted in the last chapter1 involves a sacrifice for which the only adequate compensation is interest1 and likewise all those persons who are in a position to choose between present and future luxuries4 ,were interest suppressed these classes of persons would cease to save for this kind of future goods4 ,according to ,professor ,taussig1 most saving is done by the well-to-do and the rich4#ade ,on this hypothesis it seems probable that the abolition of interest would diminish the savings and capital of the community very considerably2 for the accumulations of the wealthy are derived mainly from interest rather than from salaries4 ,on the other hand1 the suppression of interest should bring about a much wider diffusion of wealth4 ,the sums formerly paid out as interest1 would be distributed among the masses of the population as increased wages and reduced costs of living4 ,hence the masses would possess an immensely increased capacity for saving1 which might offset or even exceed the loss of saving-power among those who now receive interest-incomes4#adf ,to sum up the results of our inquiry concerning the necessity of interest3 ,the fact that men now receive interest does not prove that they would not save without interest4 ,the fact that many men would certainly save without interest does not prove that a sufficient amount would be saved to provide the community with the necessary supply of capital4 ,whether the savings of those classes that increased their accumulations would counteract the decreases in the saving of the richer classes1 is a question that admits of no definite or confident answer4 ,the ,state ,is ,justified in ,permitting ,interest ,if we assume that the suppression of interest would cause a considerable decline in saving and capital1 we must conclude that the community would be worse off than under the present system4 ,to diminish greatly the instruments of production1 and consequently the supply of goods for consumption1 would create far more hardship than it would relieve4 ,while workless incomes would be suppressed1 and personal incomes more nearly equalised1 the total amount available for distribution would probably be so much smaller as to cause a deterioration in the condition of every class4 ,in this hypothesis the ,state would do wrong to abolish the system of interest4 ,if1 however1 we assume that no considerable amount of evil would follow1 or that the balance of results would be favourable1 the question of the proper action of the ,state becomes somewhat complex4 ,in the first place1 interest could not rightfully be suppressed while the private taking of rent remained4 ,to adopt such a course would be to treat the receivers of property incomes inequitably4 ,landowners would continue to receive an income from their property1 while capital owners would not2 yet the moral claims of the former to income are no better than those of the latter4 ,in the second place1 the ,state would be obliged to compensate the owners of existing capital instruments for the decline in value which1 as we have already seen1 would occur when the item of interest was eliminated from the cost of reproducing such capital instruments4 ,it would likewise be under moral obligation to compensate landowners for whatever decrease in value befell their property as a result of the abolition of rent4 ,nevertheless1 the practical difficulties confronting the legal abolition of interest are apparently so great as to render the attempt socially unwise and futile4 ,in order to be effective the prohibition would have to be international4 ,were it enforced in only one or in a few countries1 these would suffer far more through the flight of capital than they would gain through the abolition of interest4 ,the technical obstacles in any case would be well nigh insuperable4 ,if the attempt were made to suppress interest on producing capital1 as well as on loans1 the civil authorities would be unable to determine with any degree of precision what part of the gross returns of a business was pure interest1 and what part was a necessary compensation for risk and the labour of management4 ,should the ,state try to solve this problem by allowing the directors of industry varying salaries to correspond with their comparative degrees of efficiency1 and different rates of insurance-payments to represent the different risks1 it would inevitably make some allowances so low as to discourage labour and enterprise1 and others so high as to give the recipients a considerable amount of pure interest in the guise of profits and salaries4 ,should it fix a flat rate of salaries and profits1 the more efficient undertakers would refuse to put forth their best efforts1 and the more perilous enterprises would not be undertaken4 ,the supervision of expenses1 receipts1 and other details of business that would be required to prevent evasion of the law1 would not improbably cost more than the total amount now paid in the form of interest4 ,on the other hand1 if the method of suppression were confined to loans it would probably prove only a little less futile than the effort to abolish interest on productive capital4 ,the great majority of those who were prevented from lending at interest would invest their money in stocks1 land1 buildings1 and other forms of productive property4 ,moreover1 it is probable that a large volume of loans would be made despite the prohibition4 ,in the ,middle ,ages1 when the amount of money available for lending was comparatively small1 and when ,state and ,church and public opinion were unanimous in favour of the policy1 the legal prohibition of loans was only partially effective4 ,now that the supply of and the demand for loans have enormously increased1 and interest is not definitely disapproved by the ,church or the public1 a similar effort by the ,state would undoubtedly prove a failure4 ,even if it were entirely successful it would only decrease1 not abolish1 interest on productive capital4#adg ,in view of the manifold and grave uncertainties of the situation1 it is practically certain that modern ,states are justified in permitting interest4 ,civil ,authorisation not ,sufficient for ,individual ,justification ,this justification of the attitude of the ,state does not of itself demonstrate that the capitalist has a right to accept interest4 ,the civil law tolerates many actions which are morally wrong in the individual2 for example1 the payment of starvation wages1 the extortion of unjust prices1 and the traffic in immorality4 ,obviously legal toleration does not per se nor always exonerate the individual offender4 ,how1 then1 shall we justify the individual receiver of interest8 ,as already pointed out more than once1 those persons who would not save without interest are justified on the ground of sacrifice4 ,so long as the community desires their savings1 and is willing to pay interest on them1 the savers may take interest as the fair equivalent of the inconvenience that they undergo in performing this social service4 ,the precise problem before us1 then1 is the justification of those savers and capitalists who do not need the inducement of interest1 and whose functions of saving and conserving capital are sufficiently compensated without interest4 ,it is a fact that the civil law can sometimes create moral rights and obligations4 ,for example2 the statute requiring a person to repair losses that he has unintentionally inflicted upon his neighbour is held by the moral theologians to be binding in conscience1 as soon as the matter has been adjudicated by the court4 ,in other words1 this civil regulation confers on the injured man property rights1 and imposes on the morally inculpable injurer property obligations4 ,the civil statutes also give moral validity to the title of prescription1 or adverse possession4 ,when the alien possessor has complied with the legal provisions that apply1 he has a moral right to the property1 even though the original owner should assert his claim at a later time4 ,some moral theologians maintain that a legal discharge in bankruptcy liberates the bankrupt from the moral obligation of satisfying his unpaid debts4 ,several other situations might be cited in which the ,state admittedly creates moral rights of individual ownership which would have no definite existence in the absence of such legal action and authorisation4#adh ,this principle would seem to have received a particularly pertinent application for our inquiry in the doctrine of prmium legale as a title of interest on loans4 ,in the ,opus ,morale of ,ballerini-,palmieri can be found a long list of moral theologians living in the seventeenth and eighteenth centuries who maintained that the mere legal sanction of a certain rate of interest was a sufficient moral justification for the lender4#adi ,while holding to the traditional doctrine that interest was not capable of being justified on intrinsic grounds1 these writers contended that by virtue of its power of eminent domain the ,state could transfer from the borrower to the lender the right to the interest paid on a loan4 ,they did not mean that the ,state could arbitrarily take one man's property and hand it over to another1 but only that1 when it sanctioned interest for the public welfare1 this extrinsic circumstance 7like the other extrinsic titles approved by moralists7 annulled the claim of the borrower in favour of the lender4 ,in other words1 they maintained that the money paid in loan-interest did not belong to either borrower or lender with certainty or definiteness until the matter was determined by economic conditions and extrinsic circumstances4 ,hence legal authorisation for the common good was morally sufficient to award it to the lender4 ,more than one of them declared that the ,state had the same right to determine this indeterminate property1 to assign the ownership to the lender1 that it had to transfer property titles by the device of prescription4 ,and their general position seems to have been confirmed by the response of the ,congregation of the ,poenitentiaria1 ,feb41 #ahcb1 to the ,bishop of ,verona1 the substance of which was that a confessor might adopt and act upon this position4#aej ,and yet1 neither this nor any of the other precedents cited above1 are sufficient to give certain moral sanction to the practice of interest-taking by those persons who would continue to save if interest were abolished4 ,all the acts of legal authorisation that we have been considering relate to practices which are beneficial and necessary to society4 ,only in such cases has the ,state the moral authority to create or annul property rights4 ,in the seventeenth and eighteenth centuries the legal authorisation of a certain rate of interest made that rate morally lawful simply because this legal act gave formal and authoritative testimony to the social utility of interest-taking4 ,the ,state merely declared the reasonableness1 and fixed the proper limits of the practice4 ,the beneficent effect of interest-taking upon society was its underlying justification1 was the ultimate fact which made it reasonable1 and which gave to the action of the ,state moral value4 ,had the taking of interest on loans not been allowed the bulk of possible savings would either not have been saved at all1 or would have been hoarded instead of converted into capital4 ,and that money was badly needed in the commercial and industrial operations of the time4 ,hence the owners of it were in the position of persons who regarded saving and investing as a sacrifice for which interest was a necessary and proper compensation4 ,to-day1 however1 there are millions of persons who would continue to perform both these functions without the inducement of interest4 ,therefore1 the public good does not require that they should receive interest1 nor that the ,state should have the power to clothe their interest-incomes with moral lawfulness4 ,inasmuch as the ,state is not certain that the abolition of interest would be socially expedient or practically possible1 it is justified in permitting the institution to continue2 but it has no power to affect the morality of interest-taking as an individual action4 ,how the ,interest-,taker ,is ,justified ,although the interest received by the non-sacrifice savers is not clearly justifiable on either intrinsic or social grounds1 it is not utterly lacking in moral sanctions4 ,in the first place1 we have not contended that the intrinsic factors of productivity and service are certainly invalid morally4 ,we have merely insisted that the moral worth of these titles has never been satisfactorily demonstrated4 ,possibly they have a greater and more definite efficacy than has yet been shown by their advocates4 ,in more concrete terms1 we admit that the productivity of capital and the service of the capitalist to the community1 are possible and doubtful titles to interest4 ,a doubtful title to property is1 indeed1 insufficient by itself4 ,in the case of the interest receiver1 however1 the doubtful titles of productivity and service are reinforced by the fact of possession4 ,thus supplemented1 they are sufficient to justify the non-sacrifice saver in giving himself the benefit of the doubt as regards the validity of his right to take interest4 ,to be sure1 this indefinite and uncertain claim would be overthrown by a more definite and positive title4 ,but no such antagonistic title exists4 ,neither the consumer nor the labourer can show any conclusive reason why interest should go to him rather than to the capitalist4 ,hence the latter has at least a presumptive title4 ,in the circumstances this is morally sufficient4 ,to this justification by presumption must be added a justification by analogy4 ,the non-sacrifice savers seem to be in about the same position as those other agents of production whose rewards are out of proportion to their sacrifices4 ,for example2 the labourer of superior native ability gets as much compensation for the same quality and quantity of work as his companion who has only ordinary ability2 and the exceptionally intelligent business man stands in the same relation to his less efficient competitor2 yet the sacrifices undergone by the former of each pair is less than that suffered by the latter4 ,it would seem that if the more efficient men may properly take the same rewards as those who make larger sacrifices1 the non-sacrifice capitalist might lawfully accept the same interest as the man whose saving involves some sacrifice4 ,on this principle the lenders who would not have invested their money in a productive enterprise were nevertheless permitted by the moralists of the post-medival period to take advantage of the title of lucrum cessans4 ,although they had relinquished no opportunity of gain1 nor made any sacrifice1 they were put on the same moral level as sacrificing lenders1 and were allowed to take the same interest4 ,as a determinant of ownership1 possession is the feeblest of all factors1 and yet it is of considerable importance for a large proportion of incomes and property4 ,in the distribution of the national product1 as well as in the division of the original heritage of the earth1 a large part is played by the title of first occupancy4 ,much of the product of industry is assigned to the agents of production mainly on the basis of inculpable possession4 ,that is2 it goes to its receivers automatically1 in exchange for benefits to those who hand it over1 and without excessive exploitation of their needs4 ,just as the first arrival on a piece of land may regard it as a no-man's territory1 and make it his own by the mere device of appropriation1 so the capitalist may get morally valid possession of interest4 ,sometimes1 indeed1 this debatable share1 this no-man's share of the product of industry1 is secured in some part by the consumer of the labourer4 ,in such cases their title to it is just as valid as the title of the capitalist1 notwithstanding the doubtful titles of productivity and service which the latter has in his favour4 ,first occupancy and possession are the more decisive factors4 ,in the great majority of instances1 however1 the capitalist is the first occupant1 and therefore the lawful possessor of the interest-share4 ,the general justification of interest set forth in the immediately preceding paragraphs is supplemented in the case of the great majority of capital owners by the fact that their income from this source is relatively insignificant4 ,the average income of the farmers of the ,united ,states is only #gbd dollars per year1 and of this #cbb dollars is interest on the capital invested in the farm4#aea ,even when we make due allowance for the high purchasing power of farm incomes1 due to the lower cost of foodstuffs and house rent1 the total amount of #gbd dollars provides only a very moderate living4 ,consequently the great majority of farmers can regard the interest that they receive as a necessary part of the remuneration that is fairly due them on account of their labour1 sacrifices1 and risks4 ,so far as they are concerned1 the justification of interest1 as interest1 is not a practical question4 ,the same observation applies to the majority of urban business men1 such as small merchants and manufacturers4 ,their interest can be justified as not more than fair wages and profits4 ,again1 there is a large number of interest receivers who are entirely dependent upon this kind of income1 and who obtain therefrom only a moderate livelihood4 ,they are mainly children1 aged persons1 and invalids4 ,unlike the classes just described1 they cannot justify their interest as a fair supplement to wages2 however1 they may reasonably claim it as their equitable or charitable share of the common heritage of the earth4 ,if they did not receive this interest-income they would have to be supported by their relatives or by the ,state4 ,for many reasons this would be a much less desirable arrangement4 ,consequently their general claim to interest is supplemented by considerations of human welfare4 ,the difference between the ethical character of the interest discussed in the last two paragraphs and of that received by persons who possess large incomes1 is too often overlooked in technical treatises4 ,every man owning any productive goods is reckoned as a capitalist1 and assumed to receive interest4 ,if1 however1 a man's total interest-income is so small that when combined with all his other revenues it merely completes the equivalent of a decent living1 it is surely of very little significance as interest4 ,it stands in no such need of justification as the interest obtained by men whose incomes amount to1 say1 ten thousand dollars a year and upwards4 ,still another confirmatory title of interest is suggested by the following well known declaration of ,st4 ,thomas ,aquinas3 ,the possession of riches is not in itself unlawful if the order of reason be observed3 that a man should possess justly what he owns1 and use it in a proper manner for himself and others4#aeb ,neither just acquisition nor proper use is alone sufficient to render private possessions morally good4 ,both must be present4 ,as we have seen above1 the capitalist can appeal to certain presumptive and analogous titles which justify practically his acquisition of interest2 but there can be no doubt that his claim and his moral power of disposal are considerably strengthened when he puts his interest-income to a proper use4 ,one way of so using it is for a reasonable livelihood1 as exemplified in the case of the farmers1 business men1 and non-workers whom we considered above4 ,those persons who receive incomes in excess of their reasonable needs could devote the surplus to religion1 charity1 education1 and a great variety of altruistic purposes4 ,we shall deal with this matter specifically in the chapter on the ,duty of ,distributing ,superfluous ,wealth4 ,in the meantime it is sufficient to note that the rich man who makes a benevolent use of his interest-income has a special reason for believing that his receipt of interest is justified4 ,the decisive value attributed to presumption1 analogy1 possession1 and doubtful titles in our vindication of the capitalist's claim to interest1 is no doubt disappointing to those persons who desire clear-cut mathematical rules and principles4 ,nevertheless1 they are the only factors that seem to be available4 ,while the title that they confer upon the interest receiver is not as definite nor as noble as that by which the labourer claims his wages or the business man his profits1 it is morally sufficient4 ,it will remain logically and ethically unshaken until more cogent arguments have been brought against it than have yet appeared in the denunciations of the income of the capitalist4 ,and what is true of him is likewise true of the rent receiver1 and of the person who profits by the unearned increment of land values4 ,in all three cases the presumptive justification of workless incomes will probably remain valid as long as the present industrial system endures4 ,,footnotes3 #adb ,growth of ,capital1 p4 #aeb4 #adc ,cf4 ,gonner1 ,interest and ,saving1 p4 #gc2 ,cassel1 ,the ,nature and ,necessity of ,interest1 ch4 iv4 #add ,new ,york1 #aijg4 #ade ,principles of ,economics1 ,,ii1 #db4 #adf ,cf4 ,hobson1 ,the ,economics of ,distribution1 pp4 #bei-bfe4 #adg ,cf4 ,fisher1 ,elementary ,principles of ,economics1 pp4 #cif1 #cig4 ,however1 he does not discuss in this passage the possibility of suppressing interest on productive capital by a direct method4 #adh ,cf4 ,lehmkuhl1 ,theologia ,moralis1 ,i1 nos4 #iag1 #ife1 #ajce4 #adi ,vol4 #c1 pp4 #fag-fbi2 #b;d ed4 #aej ,ballerini-,palmieri1 loc4 cit42 cf4 ,van ,roey1 op4 cit41 pp4 #gc-ge4 #aea ,cf4 ,american ,economic ,review1 ,march1 #aiaf2 p4 #df4 #aeb ,contra ,gentiles1 lib4 #c1 c4 #abc4 ,,chapter ,,xiv ,,co-,,operation ,,as ,a ,,partial ,,solvent ,,of ,,capitalism ,interest is not a return for labour4 ,the majority of interest receivers are1 indeed1 regularly engaged at some active task1 whether as day labourers1 salaried employs1 directors of industry1 or members of the professions2 but for these services they obtain specific and distinct compensation4 ,the interest that they get comes to them solely in their capacity as owners of capital1 independently of any personal activity4 ,from the viewpoint of economic distribution1 interest is a workless income4 ,as such1 it seems to challenge that ethical intuition which connects reward with effort and which inclines to regard income from any other source as not quite normal4 ,moreover1 interest absorbs a large part of the national income1 and perpetuates grave economic inequalities4#aec ,nevertheless1 interest cannot be wholly abolished4 ,as long as capital remains in private hands1 its owners will demand and obtain interest4 ,the only way of escape is by the road of ,socialism1 and this would prove a blind alley4 ,as we have seen in a preceding chapter1 ,socialism is ethically and economically impossible4 ,may not the burdens and disadvantages of interest be mitigated or minimised8 ,such a result could conceivably be reached in two ways3 the sum total of interest might be reduced1 and the incomes derived from interest might be more widely distributed4 ,reducing the ,rate of ,interest ,no considerable diminution of the interest-volume can be expected through a decline in the interest rate4 ,as far back as the middle of the eighteenth century1 ,england and ,holland were able to borrow money at three per cent4 ,during the period that has since intervened1 the rate has varied from three to six per cent4 on this class of loans4 ,between #ahgj and #ahij1 the general rate of interest declined about two per cent41 but it has risen since the latter date about one per cent4 ,the ,great ,war now 7#aiaf7 in action is destroying an enormous amount of capital1 and it will1 as in the case of all previous military conflicts of importance1 undoubtedly be followed by a marked rise in the rate of interest4 ,on the other hand1 the only definite grounds upon which a decline in the rate can be hoped for are either uncertain or unimportant4 ,they are the rapid increase of capital1 and the extension of government ownership and operation of natural monopolies4 ,the first is uncertain in its effects upon the rate of interest because the increased supply of capital is often neutralised by the process of substitution4 ,that is1 a large part of the new capital does not compete with and bring down the price of the old capital4 ,instead1 it is absorbed in new inventions1 new types of machinery1 and new processes of production1 all of which take the place of labour1 thus tending to increase rather than diminish the demand for capital and the rate of interest4 ,to be sure1 the demand for capital thus arising has not always been sufficient to offset the enlarged supply4 ,since the ,industrial ,revolution capital has at certain periods and in certain regions increased so rapidly that it could not all find employment in new forms and in old forms at the old rate4 ,in some instances a decline in the rate of interest can be clearly traced to the disproportionately quick growth of capital4 ,but this phenomenon has been far from uniform1 and there is no indication that it will become so in the future4 ,the possibilities of the process of substitution have been by no means exhausted4 ,the effects of government ownership are even more problematical4 ,states and cities are1 indeed1 able to obtain capital more cheaply than private corporations for such public utilities as railways1 telegraphs1 tramways1 and street lighting2 and public ownership of all such concerns will probably become general in the not remote future4 ,nevertheless the social gain is not likely to be proportionate to the reduction of interest on this section of capital4 ,a part1 possibly a considerable part1 of the saving in interest will be neutralised by the lower efficiency and greater cost of operation2 for in this respect publicly managed are inferior to privately managed enterprises4 ,consequently1 the charges to the public for the services rendered by these utilities cannot be reduced to the same degree as the rate of interest on the capital4 ,on the other hand1 the exclusion of private operating capital from this very large field of public utilities should increase competition among the various units of capital1 and thus bring down its rewards4 ,to what extent this would happen cannot be estimated even approximately4 ,the only safe statement is that the decline in the general rate of interest would probably be slight4 ,need for a ,wider ,distribution of ,capital ,the main hope of lightening the social burden of interest lies in the possible reduction in the necessary volume of capital1 and especially in a wider distribution of interest-incomes4 ,in many parts of the industrial field there is a considerable waste of capital through unnecessary duplication4 ,this means that a large amount of unnecessary interest is paid by the consumer in the form of unnecessarily high prices4 ,again1 the owners of capital and receivers of interest constitute only a minority of the population of all countries1 with the possible exception of the ,united ,states4 ,the great majority of the wage earners in all lands possess no capital1 and obtain no interest4 ,not only are their incomes small1 often pitiably small1 but their lack of capital deprives them of the security1 confidence1 and independence which are required for comfortable existence and efficient citizenship4 ,they have no income from productive property to protect them against the cessation of wages4 ,during periods of unemployment they are frequently compelled to have recourse to charity1 and to forego many of the necessary comforts of life4 ,so long as the bulk of the means of production remains in the hands of a distinct capitalist class1 this demoralising insecurity of the workers must continue as an essential part of our industrial system4 ,while it might conceivably be eliminated through a comprehensive scheme of ,state insurance1 this arrangement would substitute dependence upon the ,state for dependence upon the capitalist1 and be much less desirable than ownership of income-bearing property4 ,the workers who possess no capital do not enjoy a normal and reasonable degree of independence1 self respect1 or self confidence4 ,they have not sufficient control over the wage contract and the other conditions of employment1 and they have nothing at all to say concerning the goods that they shall produce1 or the persons to whom their product shall be sold4 ,they lack the incentive to put forth their best efforts in production4 ,they cannot satisfy adequately the instinct of property1 the desire to control some of the determining forms of material possession4 ,they are deprived of that consciousness of power which is generated exclusively by property1 and which contributes so powerfully toward the making of a contended and efficient life4 ,they do not possess a normal amount of freedom in politics1 nor in those civic and social relations which lie outside the spheres of industry and politics4 ,in a word1 the worker without capital has not sufficient power over the ordering of his own life4 ,the ,essence of ,co-operative ,enterprise ,the most effective means of lessening the volume of interest1 and bringing about a wider distribution of capital1 is to be found in co-operative enterprise4 ,co-operation in general denotes the unified action of a group of persons for a common end4 ,a church1 a debating club1 a joint stock company1 exemplifies co-operation in this sense4 ,in the strict and technical sense1 it has received various definitions4 ,professor ,taussig declares that it consists essentially in getting rid of the managing employer2 but this description is applicable only to co-operatives of production4 ,a combination of individuals to economise by buying in common1 or increase their profits by selling in common 7,encyclopedia ,britannica7 is likewise too narrow1 since it fits only distributive and agricultural co-operation4 ,according to ,c4 ,r4 ,fay1 a co-operative society is an association for the purpose of joint trading1 originating among the weak1 and conducted always in an unselfish spirit4 ,if the word1 trading be stretched to comprehend manufacturing as well as commercial activities1 ,fay's definition is fairly satisfactory4 ,the distinguishing circumstance1 originating among the weak1 is also emphasised by ,father ,pesch in his statement that the essence1 aim1 and meaning of co-operation are to be found in a combination of the economically weak in common efforts for the security and betterment of their condition4#aed ,in order to give the proper connotation for our purpose1 we shall define co-operation as1 that joint economic action which seeks to obtain for a relatively weak group all or part of the profits and interest which in the ordinary capitalist enterprise are taken by a smaller and different group4 ,this formula puts in the foreground the important fact that in every form of co-operative effort1 some interest or profits1 or both1 are diverted from those who would have received them under purely capitalistic arrangements1 and distributed among a larger number of persons4 ,thus it indicates the bearing of co-operation upon the problem of lightening the social burden of interest4 ,from the viewpoint of economic function1 co-operation may be divided into two general kinds1 producers' and consumers'4 ,the best example of the former is a wage earners' productive society2 of the latter1 a co-operative store4 ,credit co-operatives and agricultural co-operatives fall mainly under the former head1 inasmuch as their principal object is to assist production1 and to benefit men as producers rather than as consumers4 ,hence from the viewpoint of type1 co-operation may be classified as credit1 agricultural1 distributive1 and productive4 ,co-operative ,credit ,societies ,a co-operative credit society is a bank controlled by the persons who patronise it1 and lending on personal rather than material security4 ,such banks are intended almost exclusively for the relatively helpless borrower1 as1 the small farmer1 artisan1 shopkeeper1 and the small man generally4 ,fundamentally they are associations of neighbours who combine their resources and their credit in order to obtain loans on better terms than are accorded by the ordinary commercial banks4 ,the capital is derived partly from the sale of shares of stock1 partly from deposits1 and partly from borrowed money4 ,in ,germany1 where credit associations have been more widely extended and more highly developed than in any other country1 they are of two kinds1 named after their respective founders1 ,schulze-,delitzsch and ,raiffeisen4 ,the former operates chiefly in the cities1 serves the middle classes rather than the very poor1 requires all its members to subscribe for capital stock1 commits them to a long course of saving1 and thus develops their interest as lenders4 ,the ,raiffeisen societies have1 as a rule1 very little share capital1 exist chiefly in the country districts1 especially among the poorest of the peasantry1 are based mostly on personal credit1 and do not profess to encourage greatly the saving and lending activities of their members4 ,both forms of association loan money to their members at lower rates of interest than these persons could obtain elsewhere4 ,hence credit co-operation directly reduces the burden of interest4 ,the ,schulze-,delitzsch societies have more than half a million members in the cities and towns of ,germany1 sixty per cent4 of whom take advantage of the borrowing facilities4 ,the ,raiffeisen banks comprise about one-half of all the independent ,german agriculturists4 ,some form of co-operative banking is well established in every important country of ,europe1 except ,denmark and ,great ,britain4 ,in the former country its place seems to be satisfactorily filled by the ordinary commercial banks4 ,its absence from ,great ,britain is apparently due to the credit system provided by the large landholders1 to the scarcity of peasant proprietors1 and to general lack of initiative4 ,it is especially strong in ,italy1 ,belgium1 and ,austria1 and it has made a promising beginning in ,ireland4 ,in every country in which it has obtained a foothold1 it gives indication of steady and continuous progress4 ,nevertheless it is subject to definite limits4 ,it can never make much headway among that class of persons whose material resources are sufficiently large and palpable to command loans on the usual terms offered by the commercial banks4 ,as a rule1 these terms are quite as favourable as those available through the co-operative credit associations4 ,it is only because the poorer men cannot obtain loans from the commercial banks on the prevailing conditions that they are impelled to have recourse to the co-operative associations4 ,co-operative ,agricultural ,societies ,the chief operations of agricultural co-operative societies are manufacturing1 marketing1 and purchasing4 ,in the first named field the most important example is the co-operative dairy4 ,the owners of cows hold the stock or shares of the concern1 and in addition to dividends receive profits in proportion to the amount of milk that they supply4 ,in ,ireland and some other countries1 a portion of the profits goes to the employs of the dairy as a dividend on wages4 ,other productive co-operatives of agriculture are found in cheese making1 bacon curing1 distilling1 and wine making4 ,all are conducted on the same general principles as the co-operative dairy4 ,through the marketing societies and purchasing societies1 the farmers are enabled to sell their products to better advantage1 and to obtain materials needed for carrying on agricultural operations more cheaply than would be possible by isolated individual action4 ,some of the products marketed by the selling societies are eggs1 milk1 poultry1 fruit1 vegetables1 live stock1 and various kinds of grain4 ,the purchasing societies supply for the most part manures1 seeds1 and machinery4 ,occasionally they buy the most costly machinery in such a way that the association becomes the corporate owner of the implements4 ,in these cases the individual members have only the use of the machines1 but they would be unable to enjoy even that advantage were it not for the intervention of the co-operative society4 ,where such arrangements exist1 the society exemplifies not only co-operative buying but co-operative ownership4 ,agricultural co-operation has become most widely extended in ,denmark1 and has displayed its most striking possibilities in ,ireland4 ,relatively to its population1 the former country has more farmers in co-operative societies1 and has derived more profit therefrom1 than any other nation4 ,the rapid growth and achievements of agricultural co-operation in the peculiarly unfavourable circumstances of ,ireland constitute the most convincing proof to be found anywhere of the essential soundness and efficacy of the movement4 ,various forms of rural co-operative societies are solidly established in ,germany1 ,france1 ,belgium1 ,italy1 and ,switzerland4 ,in recent years the movement has made some progress in the ,united ,states1 especially in relation to dairies1 grain elevators1 the marketing of live stock and fruit1 and various forms of rural insurance4 ,the co-operative insurance companies effect a saving to the ,minnesota farmers of #gjj1jjj annually1 and the co-operative elevators handle about #cj per cent4 of the grain marketed in that state4 ,in #aiae the business transacted by the co-operative marketing and purchasing organisations of the farmers of the ,united ,states amounted to #a1djj1jjj1jjj4 ,the transformation in the rural life of more than one ,european community through co-operation has amounted to little less than a revolution4 ,higher standards of agricultural products and production have been set up and maintained1 better methods of farming have been inculcated and enforced1 and the whole social1 moral1 and civic life of the people has been raised to a higher level4 ,from the viewpoint of material gain1 the chief benefits of agricultural co-operation have been the elimination of unnecessary middlemen1 and the economies of buying in large quantities1 selling in the best markets1 and employing the most efficient implements4 ,as compared with farming conducted on a large scale1 the small farm possesses certain advantages1 and is subject to certain disadvantages4 ,it is less wasteful1 permits greater attention to details1 and makes a greater appeal to the self interest of the cultivator2 but the small farmer cannot afford to buy the best machinery1 nor is he in a position to carry on to the best advantage the commercial features of his occupation1 such as borrowing1 buying1 and marketing4 ,co-operation frees him from all these handicaps4 ,the co-operative community 444 is one in which groups of humble men combine their efforts1 and to some extent their resources1 in order to secure for themselves those advantages in industry which the masters of capital derive from the organisation of labour1 from the use of costly machinery1 and from the economies of business when done on a large scale4 ,they apply in their industry the methods by which the fortunes of the magnates in commerce and manufacture are made4 ,these words1 uttered by a prominent member of the ,irish co-operative movement1 summarise the aims and achievements of agricultural co-operation in every country of ,europe in which it has obtained a strong foothold4 ,in every such community the small farm has gained at the expense of the large farm system4 ,finally1 agricultural co-operation reduces the burden of interest by eliminating some unnecessary capital1 stimulates saving among the tillers of the soil by providing a ready and safe means of investment1 and in manifold ways contributes materially toward a better distribution of wealth4 ,co-operative ,mercantile ,societies ,co-operative stores are organised by and for consumers4 ,in every country they follow rather closely the ,rochdale system1 so called from the ,english town in which the first store of this kind was established in #ahdd4 ,the members of the co-operative society furnish the capital1 and receive thereon interest at the prevailing rate1 usually five per cent4 ,the stores sell goods at about the same prices as their privately owned competitors1 but return a dividend on the purchases of all those customers who are members of the society4 ,the dividends are provided from the surplus which remains after wages1 interest on the capital stock1 and all other expenses have been paid4 ,in some co-operative stores non-members receive a dividend on their purchases at half the rate accorded to members of the society1 but only on condition that these payments shall be invested in the capital stock of the enterprise4 ,and the members themselves are strongly urged to make this disposition of their purchase-dividends4 ,since the latter are paid only quarterly1 the co-operative store exercises a considerable influence toward inducing its patrons to save and to become small capitalists4 ,in ,great ,britain the vast majority of the retail stores have been federated into two great wholesale societies1 one in ,england and the other in ,scotland4 ,the retail stores provide the capital1 and participate in the profits according to the amounts purchased1 just as the individual consumers furnish the capital and share the profits of the retail establishments4 ,the ,scottish ,wholesale ,society divides a part of the profits among its employs4 ,besides their operations as jobbers1 the wholesale societies are bankers for the retail stores1 and own and operate factories1 farms1 warehouses1 and steamships4 ,many of the retail co-operatives likewise carry on productive enterprises1 such as milling1 tailoring1 bread making1 and the manufacture of boots1 shoes1 and other commodities1 and some of them build1 sell1 and rent cottages1 and lend money to members who desire to obtain homes4 ,the co-operative store movement has made greatest progress in its original home1 ,great ,britain4 ,in #aiac about one person in every three was to some degree interested in or a beneficiary of these institutions4 ,the profits of the stores amounted to about #ga1cjb1jgj1 which was about #ce per cent4 on the capital4 ,the employs numbered about #ade1jjj1 and the sales for the year aggregated #fej1jjj1jjj4 ,the ,english ,wholesale ,society was the largest flour miller and shoe manufacturer in ,great ,britain1 and its total business amounted to #aej1jjj1jjj4 ,outside of ,great ,britain1 co-operative distribution has been most successful in ,germany1 ,belgium1 and ,switzerland4 ,it has had a fair measure of development in ,italy1 but has failed to assume any importance in ,france4 ,there is every sign that within the near future--except in ,france--the stores will come to include the great majority of the wage earning class1 which is a constantly growing percentage of the total population4#aee ,within recent years a respectable number of stores have been established on a sound basis in ,canada and the ,united ,states4 ,owing1 however1 to the marked individualism and the better economic conditions of these two countries1 the co-operative movement will continue for some time to be relatively slow4 ,as in the case of agricultural co-operation1 the money benefits accruing to the members of the co-operative stores consist mainly of profits rather than interest4 ,in the absence of the store societies1 these profits would have gone for the most part to middlemen as payments for the risks and labour of conducting privately owned establishments4 ,forty-seven of the sixty million dollars profits of the ,british co-operative stores in #aiaj were divided among more than two and one-half million members of these institutions1 instead of going to a comparatively small number of private merchants4 ,the other thirteen million dollars were interest on the capital stock4 ,had the members invested an equal amount in other enterprises they could1 indeed1 have obtained about the same rate and amount of interest1 but in the absence of the co-operative stores their inducements and opportunities to save would have been much smaller4 ,for it must be kept in mind that a very large part of the capital stock in the co-operative stores is derived from the members' dividends on their purchases at such stores1 and would not have come into existence at all without these establishments4 ,the gains of the co-operative stores1 whether classified as profits or as interest1 are evidently a not inconsiderable indication of a better distribution of wealth4 ,co-operation in ,production ,co-operative production has occasionally been pronounced a failure4 ,this judgment is too sweeping and too severe4 ,as a matter of fact1 says a prominent ,london weekly1 the co-operators' success has been even more remarkable in production than in distribution4 ,the co-operative movement runs five of the largest of our flour mills2 it has1 amongst others1 the very largest of our boot factories2 it makes cotton cloth and woollens1 and all sorts of clothing2 it has even a corset factory of its own2 it turns out huge quantities of soap2 it makes every article of household furniture2 it produces cocoa and confectionery2 it grows its own fruit and makes its own jams2 it has one of the largest tobacco factories1 and so on4 ,obviously this passage refers to that kind of productive co-operation which is carried on by the stores1 not to productive concerns owned and managed by the workers therein employed4 ,nevertheless the enterprises in question are co-operatively managed1 and hence exemplify co-operation rather than private and competitive industry4 ,they ought not to be left out of any statement of the field occupied by co-operative production4 ,the limitations and possibilities of co-operation in production can best be set forth by considering its three different forms separately4 ,the perfect form occurs when all the workers engaged in a concern own all the share capital1 control the entire management1 and receive the whole of the wages1 profits1 and interest4 ,in this field the failures have been much more numerous and conspicuous than the successes4 ,godin's stove works at ,guise1 ,france1 is the only important enterprise of this kind that is now in existence4 ,great ,britain has several establishments in which the workers own a large part of the capital1 but apparently none in which they are the sole proprietors and managers4 ,the labour societies of ,italy1 consisting mostly of diggers1 masons1 and bricklayers1 co-operatively enter into contracts for the performance of public works1 and share in the profits of the undertaking in addition to their wages2 but the only capital that they provide consists of comparatively simple and inexpensive tools4 ,the raw material and other capital is furnished by the public authority which gives the contract4 ,a second kind of productive co-operation is found in the arrangement known as co-partnership4 ,this is the system under which1 in the first place1 a substantial and known share of the profit of a business belongs to the workers in it1 not by right of any shares they may hold1 or any other title1 but simply by right of the labour they have contributed to make the profit2 and1 in the second place1 every worker is at liberty to invest his profit1 or any other savings1 in shares of the society or company1 and so become a member entitled to vote on the affairs of the body which employs him4#aef ,so far as its first1 or profit sharing1 feature is concerned1 co-partnership is not genuine co-operation1 for it includes neither ownership of capital nor management of the business4 ,co-operative action begins only with the adoption of the second element4 ,in most of the existing co-partnership concerns1 all the employs are urged1 and many of them required to invest at least a part of their profits in the capital stock4 ,the most notable and successful of these experiments is that carried on by the ,south ,metropolitan ,gas ,company of ,london4 ,practically all the company's #f1jjj employs are now among its stockholders4 ,although their combined holdings are only about one-twenty-eighth of the total1 they are empowered to select two of the ten members of the board of directors4 ,essentially the same co-partnership arrangements have been adopted by about one-half the privately owned gas companies of ,great ,britain4 ,in none of them1 however1 have the workers obtained as yet such a large percentage of either ownership or control as in the ,south ,metropolitan4 ,co-partnership exists in several other enterprises in ,great ,britain1 and is found in a considerable number of ,french concerns4 ,there are a few instances in the ,united ,states1 the most thoroughgoing being that of ,n4 ,o4 ,nelson ,co4 at ,le ,claire1 ,ill4 ,as already noted1 the co-operative stores exemplify a third type of co-operative production4 ,in some cases the productive concern is under the management of a local retail establishment1 but the great majority of them are conducted by the ,english and ,scottish ,wholesale ,societies4 ,as regards the employs of these enterprises1 the arrangement is not true co-operation1 since they have no part in the ownership of the capital4 ,the ,scottish ,wholesale ,society1 as we have seen1 permits the employs of its productive works to share in the profits thereof2 nevertheless it does not admit them as stockholders1 nor give them any voice in the management4 ,in all cases the workers may1 indeed1 become owners of stock in their local retail stores4 ,since the latter are stockholders in the wholesale societies1 which in turn own the productive enterprises1 the workers have a certain indirect and attenuated proprietorship in the productive concerns4 ,but they derive therefrom no dividends4 ,all the interest and most of the profits of the productive establishments are taken by the wholesale and retail stores4 ,for it is the theory of the wholesale societies that the employs in the works of production should share in the gains thereof only as consumers4 ,they are to profit only in the same way and to the same extent as other consumer-members of the local retail establishments4 ,the most effective and beneficial form of co-operative production is evidently that which has been described as the perfect type4 ,were all production organised on this plan1 the social burden of interest would be insignificant1 industrial despotism would be ended1 and industrial democracy realised4 ,as things are1 however1 the establishments exemplifying this type are of small importance4 ,their increase and expansion are impeded by lack of directive ability and of capital1 and the risk to the workers' savings4 ,yet none of these obstacles is necessarily insuperable4 ,directive ability can be developed in the course of time1 just as it was in the co-operative stores4 ,capital can be obtained fast enough perhaps to keep pace with the supply of directive ability and the spirit of co-operation4 ,the risk undertaken by workers who put their savings into productive concerns owned and managed by themselves need not be greater than that now borne by investors in private enterprises of the same kind4 ,there is no essential reason why the former should not provide the same profits and insurance against business risks as the latter4 ,while the employs assume none of the risks of capitalistic industry1 neither do they receive any of the profits4 ,if the co-operative factory exhibits the same degree of business efficiency as the private enterprise it will necessarily afford the workers adequate protection for their savings and capital4 ,indeed1 if perfect co-operative production is to be successful at all its profits will be larger than those of the capitalistic concern1 owing to the greater interest taken by the workers in their tasks1 and in the management of the business4 ,for a long time to come1 however1 it is probable that perfect co-operative production will be confined to relatively small and local industries4 ,the difficulty of finding sufficient workers' capital and ability to carry on1 for example1 a transcontinental railroad or a nationwide steel business1 is not likely to be overcome for one or two generations4#aeg ,the labour co-partnership form of co-operation is susceptible of much wider and more rapid extension4 ,it can be adapted readily to the very large as well as to the small and medium sized concerns4 ,since it requires the workers to own but a part of the capital1 it can be established in any enterprise in which the capitalists show themselves willing and sympathetic4 ,in every industrial corporation there are some employs who possess savings1 and these can be considerably increased through the profit sharing feature of co-partnership4 ,a very long time must1 indeed1 elapse before the workers in any of the larger enterprises could get possession of all1 or even of a controlling share of the capital1 and a considerable time would be needed to educate and fit them for successful management4 ,production under the direction of the co-operative stores can be extended faster than either of the other two forms1 and it has before it a very wide even though definitely limited field4 ,the ,british wholesale societies have already shown themselves able to conduct with great success large manufacturing concerns1 have trained and attracted an adequate number of competent leaders1 and have accumulated so much capital that they have been obliged to invest several million pounds in other enterprises4 ,the possible scope of the stores and their co-operative production has been well described by ,c4 ,r4 ,fay3 distribution of goods for personal consumption1 first1 among the working class population1 secondly1 among the salaried classes who feel a homogeneity of professional interest2 production by working class organisations alone 7with rare exceptions in ,italy7 of all the goods which they distribute to their members4 ,but this is its limit4 ,distribution among the remaining sections of the industrial population2 production for distribution to these members2 production of the instruments of production1 and production for international trade2 the services of transport and exchange3 all these industrial departments are1 so far as can be seen1 permanently outside the domain of a store movement4#aeh ,the theory by which the stores attempt to justify the exclusion of the employs of their productive concerns from a share of the profits thereof is that all profits come ultimately from the pockets of the consumer1 and should all return to that source4 ,the defect in this theory is that it ignores the question whether the consumers ought not to be required to pay a sufficiently high price for their goods to provide the producers with profits in addition to wages4 ,while the wholesale stores are the owners and managers of the capital in the productive enterprises1 and on the capitalistic principle should obtain the profits1 the question remains whether this is necessarily a sound principle1 and whether it is in harmony with the theory and ideals of co-operation4 ,in those concerns which have adopted the labour co-partnership scheme1 the workers1 even when they own none of the capital1 are accorded a part of the profits4 ,it is assumed that this is a fairer and wiser method of distribution than that which gives the labourer only wages1 leaving all the profits to the manager-capitalist4 ,this feature of co-partnership rests on the theory that the workers can1 if they will1 increase their efficiency and reduce the friction between themselves and their employer to such an extent as to make the profit sharing arrangement a good thing for both parties4 ,consequently the profits obtained by the workers are a payment for this specific contribution to the prosperity of the business4 ,why should not this theory find recognition in productive enterprises conducted by the co-operative stores8 ,in the second place1 the workers in these concerns ought to be permitted to participate in the capital ownership and management4 ,they would thus be strongly encouraged to become better workers1 to save more money1 and to increase their capacity for initiative and self government4 ,moreover1 this arrangement would go farther than any other system toward reconciling the interests of producer and consumer4 ,as producer1 the worker would obtain1 besides his wages1 interest and profits up to the limit set by the competition of private productive concerns4 ,as consumer1 he would share in the profits and interest which would otherwise have gone to the private distributive enterprises4 ,in this way the producer and consumer would each get the gains that were due specifically and respectively to his activity and efficiency4 ,advantages and ,prospects of ,co-operation ,at this point it will perhaps be well to sum up the advantages and to estimate the prospects of the co-operative movement4 ,in all its forms co-operation eliminates some waste of capital and energy1 and therefore transfers some interest and profits from a special capitalist and undertaking class to a larger and economically weaker group of persons4 ,for it must be borne in mind that all co-operative enterprises are conducted mainly by and for labourers or small farmers4 ,hence the system always makes directly for a better distribution of wealth4 ,to a considerable extent it transfers capital ownership from those who do not themselves work with or upon capital to those who are so engaged2 namely1 the labourers and the farmers2 thus it diminishes the unhealthy separation now existing between the owners and the users of the instruments of production4 ,co-operation has1 in the second place1 a very great educational value4 ,it enables and induces the weaker members of economic society to combine and utilise energies and resources that would otherwise remain unused and undeveloped2 and it greatly stimulates and fosters initiative1 self confidence1 self restraint1 self government1 and the capacity for democracy4 ,in other words1 it vastly increases the development and efficiency of the individual4 ,it likewise induces him to practise thrift1 and frequently provides better fields for investment than would be open to him outside the co-operative movement4 ,it diminishes selfishness and inculcates altruism2 for no co-operative enterprise can succeed in which the individual members are not willing to make greater sacrifices for the common good than are ordinarily evoked by private enterprise4 ,precisely because co-operation makes such heavy demands upon the capacity for altruism1 its progress always has been and must always continue to be relatively slow4 ,its fundamental and perhaps chief merit is that it does provide the mechanism and the atmosphere for a greater development of the altruistic spirit than is possible under any other economic system that has ever been tried or devised4 ,by putting productive property into the hands of those who now possess little or nothing1 co-operation promotes social stability and social progress4 ,this statement is true in some degree of all forms of co-operation1 but it applies with particular force to those forms which are carried on by the working classes4 ,a steadily growing number of keen-sighted social students are coming to realise that an industrial system which permits a comparatively small section of society to own the means of production and the instrumentalities of distribution1 leaving to the great majority of the workers nothing but their labour power1 is fundamentally unstable1 and contains within itself the germs of inevitable dissolution4 ,no mere adequacy of wages and other working conditions1 and no mere security of the workers' livelihood1 can permanently avert this danger1 nor compensate the individual for the lack of power to determine those activities of life which depend upon the possession of property4 ,through co-operation this unnatural divorce of the users from the owners of capital can be minimised4 ,the worker is converted from a mere wage earner to a wage earner plus a property owner1 thus becoming a safer and more useful member of society4 ,in a word1 co-operation produces all the well recognised individual and social benefits which have in all ages been evoked by the magic of property4 ,finally1 co-operation is a golden mean between individualism and ,socialism4 ,it includes all the good features and excludes all the evil features of both4 ,on the one hand1 it demands and develops individual initiative and self reliance1 makes the rewards of the individual depend upon his own efforts and efficiency1 and gives him full ownership of specific pieces of property4 ,on the other hand1 it compels him to submerge much of the selfishness and indifference to the welfare of his fellows which characterise our individual economy4 ,it embraces all the good that is claimed for ,socialism because it induces men to consider and to work earnestly for the common good1 eliminates much of the waste of competitive industry1 reduces and redistributes the burdens of profits and interest1 and puts the workers in control of capital and industry4 ,at the same time1 it avoids the evils of an industrial despotism1 of bureaucratic inefficiency1 of individual indifference1 and of an all pervading collective ownership4 ,the resemblances that ,socialists sometimes profess to see between their system and co-operation are superficial and far less important than the differences4 ,under both arrangements the workers would1 we are told1 own and control the means of production2 but the members of a co-operative society directly own and immediately control a definite amount of specific capital1 which is essentially private property4 ,in a ,socialist rgime the workers' ownership of capital would be collective not private1 general not specific1 while their control of the productive instruments with which they worked would be shared with other citizens4 ,the latter would vastly outnumber the workers in any particular industry1 and would be interested therein not as producers but as consumers4 ,no less obvious and fundamental are the differences in favour of co-operation as regards the vital matters of freedom1 opportunity1 and efficiency4 ,in so far as the future of co-operation can be predicted from its past1 the outlook is distinctly encouraging4 ,the success attained in credit1 agriculture1 and distribution1 is a sufficient guarantee for these departments4 ,while productive co-operation has experienced more failures than successes1 it has finally shown itself to be sound in principle1 and feasible in practice4 ,its extension will necessarily be slow1 but this is exactly what should be expected by any one who is acquainted with the limitations of human nature1 and the history of human progress4 ,if a movement that is capable of modifying so profoundly the condition of the workers as is co-operative production1 gave indications of increasing rapidly1 we should be inclined to question its soundness and permanence4 ,experience has given us abundant proof that no mere system or machinery can effect a revolutionary improvement in economic conditions4 ,no social system can do more than provide a favourable environment for the development of those individual capacities and energies which are the true and the only causal forces of betterment4 ,nor is it to be expected that any of the other three forms of co-operation will ever cover the entire field to which it might1 absolutely speaking1 be extended2 or that co-operation as a whole will become the one industrial system of the future4 ,even if the latter contingency were possible it would not be desirable4 ,the elements of our economic life1 and the capacities of human nature1 are too varied and too complex to be forced with advantage into any one system1 whether capitalism1 ,socialism1 or co-operation4 ,any single system or form of socio-economic organisation would prove an intolerable obstacle to individual opportunity and social progress4 ,multiplicity and variety in social and industrial orders are required for an effective range of choices1 and an adequate scope for human effort4 ,in a general way the limits of co-operation in relation to the other forms of economic organisation have been satisfactorily stated by ,mr4 ,aneurin ,williams3 ,i suggest1 therefore1 that where there are great monopolies1 either natural or created by the combination of businesses1 there you have a presumption in favour of ,state and municipal ownership4 ,in those forms of industry where individuality is everything2 where there are new inventions to make1 or to develop or put on the market1 or merely to adopt in some rapidly transformed industry2 where the eye of the master is everything2 where reference to a committee1 or appeals from one official to another1 would cause fatal delay3 there is the natural sphere of individual enterprise pure and simple4 ,between these two extremes there is surely a great sphere for voluntary association to carry on commerce1 manufacture1 and retail trade1 in circumstances where there is no natural monopoly1 and where the routine of work is not rapidly changing1 but on the whole fairly well established and constant4#aei ,the province open to co-operation is1 indeed1 very large4 ,if it were fully occupied the danger of a social revolution would be non-existent1 and what remained of the socio-industrial problem would be relatively undisturbing and unimportant4 ,the specialisation of function in industrial organisation1 as outlined by ,mr4 ,williams1 would give a balanced economy in which the three great socio-economic systems and principles would have full play1 and each would be required to do its best in fair competition with the other two4 ,economic life would exhibit a diversity making strongly for social satisfaction and stability1 inasmuch as no very large section of the industrial population would desire to overthrow the existing order4 ,finally1 the choice of three great systems of industry would offer the utmost opportunity and scope for the energies and the development of the individual4 ,and this1 when all is said1 remains the supreme end of a just and efficient socio-industrial organisation4 ,,references ,,on ,,section ,,ii ,,fisher3 ,the ,rate of ,interest4 ,new ,york2 #aijg4 ,,cassel3 ,nature and ,necessity of ,interest4 ,london2 #aijc4 ,,gonner3 ,interest and ,saving4 ,london2 #aijf4 ,,landry3 ,l',intrt du ,capital4 ,paris2 #aijd4 ,,menger3 ,the ,right to the ,whole ,produce of ,labour4 ,london2 #ahii4 ,,cathrein-,,gettelman3 ,socialism4 ,st4 ,louis2 #aijd4 ,,skelton3 ,socialism3 ,a ,critical ,analysis4 ,new ,york2 #aiaa4 ,,spargo3 ,socialism4 ,macmillan2 #aijf4 ,,walling3 ,socialism ,as ,it ,is4 ,new ,york2 #aiab4 ,,hillquit-,,ryan3 ,socialism3 ,promise or ,menace8 ,macmillan2 #aiad4 ,,savatier3 ,la ,thorie ,moderne du ,capital et la ,justice4 ,paris2 #ahih4 ,,garriguet3 ,rgime du ,travail4 ,paris2 #aijh4 ,,funk3 ,zins und ,wucher4 ,tbingen2 #ahfh4 ,,holyoake3 ,the ,history of ,co-operation4 ,london2 #aijf4 ,,fay3 ,co-operation at ,home and ,abroad4 ,london2 #aijh4 ,,williams3 ,copartnership and ,profit-,sharing4 ,henry ,holt ,co42 #aiac4 ,,mann1 ,,sievers1 ,,cox3 ,the ,real ,democracy4 ,london2 #aiac4 ,also the works of ,taussig1 ,devas1 ,antoine1 ,hobson1 ,nearing1 ,willoughby1 and ,hitze1 which were given at the end of the introductory chapter4 ,,footnotes3 #aec ,professor ,scott ,nearing estimates the annual income derived from the ownership of property in the ,united ,states2 that is1 land and all forms of capital1 at from six to nine billion dollars4 ,professor ,w4 ,i4 ,king gives the combined shares of the national income received by the landowners and the capitalists at more than six and three-quarter billions in #aiaj4 ,according to the ,census ,bulletin on the ,estimated ,valuation of ,national ,wealth1 the capital goods of the country were in #aiab approximately #age1jjj1jjj1jjj4jj4 ,at four per cent4 this would mean an annual income of seven billion dollars4 ,the lowest of the three estimates1 six billion dollars1 is equivalent to more than sixty dollars a year for every man1 woman1 and child in the ,united ,states4 ,if that sum were equally distributed among the whole population1 it would mean an increase of between forty and sixty per cent4 in the income of the majority of workingmen's families6 ,nor do present tendencies hold out any hope of an automatic reduction of the interest-burden in the future4 ,in the opinion of ,professor ,scott ,nearing1 the present economic tendencies will greatly increase the amount of property income paid with each passing decade4 ,income1 p4 #aii2 ,new ,york1 #aiae4 ,see especially ch4 vii4 ,according to ,professor ,taussig1 the absolute amount of income going to this the capitalist class tends to increase1 and its share of the total income tends also to increase2 whereas for the labourers1 though their total income may increase1 their share of income of society as a whole tends to decline4 ,principles of ,economics1 ,,ii1 #bje4 #aed ,lehrbuch der ,nationaloekonomie1 ,,iii1 #eag4 #aee ,fay1 ,co-operation at ,home and ,abroad1 p4 #cdj4 #aef ,schloss1 ,methods of ,industrial ,remuneration1 pp4 #cec1 #ced4 #aeg ,cf41 however1 ,mr4 ,a4 ,r4 ,orage's work1 ,national ,guilds1 ,london1 #aiad4 #aeh ,op4 cit41 p4 #cda4 #aei ,copartnership and ,profit-,sharing1 p4 #bce4 ,,section ,,iii ,,the ,,moral ,,aspect ,,of ,,profits ,,chapter ,,xv ,,the ,,nature ,,of ,,profits ,we have seen that rent goes to the landlord as the price of land use1 while interest is received by the capitalist as the return for the use of capital4 ,the two shares of the product which remain to be considered include an element which is absent from both rent and interest4 ,the use for which profits and wages are paid comprises not merely the utilisation of a productive factor1 but the sustained exertion of the factor's owner4 ,like the landowner and the capitalist1 the business man and the labourer put the productive factors which they control at the disposal of the industrial process2 but they do so only when and so long as they exercise human activity4 ,the shares that they receive are payments for the continuous output of human energy4 ,no such significance attaches to rent or interest4 ,the ,functions and ,rewards of the ,business ,man ,who is the business man1 and what is the nature of his share of the product of industry8 ,let us suppose that the salaried manager of a hat factory decides to set up a business of the same kind for himself4 ,he wishes to become an entrepreneur1 an undertaker1 a director of industry1 in more familiar language1 a business man4 ,let us assume that he is without money1 but that he commands extraordinary financial credit4 ,he is able to borrow half a million dollars with which to organise1 equip1 and operate the new enterprise4 ,having selected a favourable site1 he rents it on a long term lease1 and erects thereon the necessary buildings4 ,he installs all the necessary machinery and other equipment1 hires capable labour1 and determines the kinds and quantities of hats for which he thinks that he can find a market4 ,at the end of a year1 he realises that1 after paying for labour of all sorts1 returning interest to the capitalist and rent to the landowner1 defraying the cost of repairs1 and setting aside a fund to cover depreciation1 he has left for himself the sum of ten thousand dollars4 ,this is the return for his labour of organisation and direction1 and for the risk that he underwent4 ,it constitutes the share called profits1 sometimes specified as net profits4 ,this case is artificial1 since it assumes that the business man is neither capitalist nor landowner in addition to his function as director of industry4 ,it has1 however1 the advantage of distinguishing quite sharply the action of the business man as such4 ,for the latter merely organises1 directs1 and takes the risks of the industrial process1 finds a market for the product1 and receives in return neither rent nor interest but only profits4 ,in point of fact1 however1 no one ever functions solely as business man4 ,always the business man owns some of the capital1 and very often some of the land involved in his enterprise1 and is the receiver not only of profits but of interest and rent4 ,thus1 the farmer is a business man1 but he is also a capitalist1 and frequently a landowner4 ,the grocer1 the clothier1 the manufacturer1 and even the lawyer and the doctor own a part at least of the capital with which they operate1 and sometimes they own the land4 ,nevertheless their rewards as business men can always be distinguished from their returns as capitalists and landowners by finding out what remains after making due allowance for rent and interest4 ,it is a fact that many business men1 especially those directing the smaller establishments1 use the term profits to include rent and interest on their own property4 ,in other words1 they describe their entire income from the business as profits4 ,in the present discussion1 and throughout this book generally1 profits are to be understood as comprising merely that part of the business man's returns which he takes as the reward of his labour1 and as insurance against the risks affecting his enterprise4 ,deduct from the business man's total income a sum which will cover interest on his capital at the prevailing rate and rent on his land1 and you have left his income as business man1 his profits4 ,the ,amount of ,profits ,in a preceding chapter we have seen that where the conditions of capital are the same1 there exists a fairly uniform rate of interest4 ,no such uniformity obtains in the field of profits4 ,businesses subject to the same risks and requiring the same kind of management yield very different amounts of return to their directors4 ,in a sense the business man may be regarded as the residual claimant of industry4 ,this does not mean that he takes no profits until all the other agents of production have been fully remunerated1 but that his share remains indeterminate until the end of the productive period1 say1 six months or a year1 while the shares of the other agents are determined beforehand4 ,at the end of the productive period1 the business man may find that his profits are large1 moderate1 or small1 while the landowner1 the capitalist1 and the labourer ordinarily obtain the precise amounts of rent1 interest1 and wages that they had expected to obtain4 ,that there exists no definite upper limit to profits is proved by the history of modern millionaires4 ,that there exists no rigid lower limit is proved by the large proportion of enterprises that meet with failure4 ,nevertheless it would be wrong to infer that the volume of profits is governed by no law whatever1 or that they show no tendency toward uniformity in any part of the industrial field4 ,there is a calculated or preconceived minimum4 ,no man will embark in business for himself unless he has reason to expect that it will yield him1 in addition to protection against risks1 an income as large as he could obtain by hiring his services to some one else4 ,in other words1 contemplated profits must be at least equal to the income of the salaried business manager4 ,no tendency toward uniformity of profits exists among very large enterprises nor among industries which are constantly adopting new methods and new inventions4 ,in businesses of small and moderate size1 and in those whose methods have become standardised1 such as a retail grocery store1 or a factory that turns out staple kinds of shoes1 profits tend to be about the same in the great majority of establishments4 ,in such industries the profits of the business man do not often exceed the salary that he could command as general manager for some one else in the same kind of business4 ,professor ,king estimates the total volume of profits in the ,united ,states in #aiaj as almost eight and one-half billion dollars4 ,this was #bg4e per cent4 of the national product1 as against #bd4f per cent4 in #ahij and #cj per cent4 in #aijj4afj ,he interprets the fall in the wage earners' share which has taken place since #ahij 7#ec4e to #df4i per cent47 as indicating a considerable increase in the share of those business men who control the very large industries4 ,the promoters and manipulators of these concerns have received1 as their share of the spoils1 permanent income claims1 in the shape of securities1 large enough to make ,croesus appear like a pauper4#afa ,moreover1 even outside this monopoly field1 the more able and successful business men seem to have obtained in recent years what might be termed a relatively large share of the product of industry4 ,the exceptionally efficient undertakers1 those possessing the imagination1 foresight1 judgment1 and courage to take full advantage of the recent improvements in the industrial arts1 and in the methods of production generally1 seem to have advanced in wealth and income more rapidly than any other class that has been subject to the operation of competition4 ,profits in the ,joint-,stock ,company ,up to this point we have been considering the independent business man1 the undertaker who manages his enterprise either alone or as a member of a partnership4 ,in all such concerns it is easy to identify the business man4 ,who or where is the business man in a joint stock company8 ,where are the profits1 and who gets them8 ,strictly speaking1 there is no undertaker or business man in a corporation4 ,his functions of ownership1 responsibility1 and direction are exercised by the whole body of stockholders through the board of directors and other officers4 ,it is true that in very many1 probably in most corporations1 one or a very few of the largest stockholders dominate the policies of the concern1 and exercise almost as much power and authority as though they were the sole owners4 ,neither these1 however1 nor any other officer in a corporation receives profits in the same sense as the independent owner of a business4 ,for their active services the officers of the corporation are given salaries2 for the risks that they undergo as owners of the stock they are compensated in the same way as all the other stockholders1 that is1 through a sufficiently high rate of dividend4 ,for example1 in railroads the bonds usually pay from four to five per cent41 the stock from five to six per cent4 ,the bonds represent borrowed money1 and are secured by a mortgage on the physical property4 ,the stock represents the money invested by the owners1 and is subject to all the risks of ownership2 hence its holders require the protection which is afforded by the extra one per cent4 which they obtain over that paid to the bondholders4 ,while a corporation has no profits in the sense of a reward for directive activity or a protection against risk1 it frequently possesses profits in the sense of a surplus which remains after costs and expenses of every kind have been defrayed4 ,these profits are ordinarily distributed pro rata among the stockholders1 either outright in the form of an extra dividend1 or indirectly through enlargement of the property and business of the company4 ,they are surplus gains or profits having the same intermittent and speculative character as the extra gains which the individual business man sometimes obtains in addition to those profits which are necessary to remunerate him for his labour1 and protect him against risks4 ,they are not profits in the ordinary economic sense of the term4 ,,footnotes3 #afj ,the ,wealth and ,income of the ,people of the ,united ,states1 #aeh1 #afj4 #afa ,idem1 p4 #bah4 ,,chapter ,,xvi ,,the ,,principal ,,canons ,,of ,,distributive ,,justice ,before taking up the question of the morality of profits1 it will be helpful1 if not necessary1 to consider the chief rules of justice that have been or might be adopted in distributing the product of industry among those who participate actively in the productive process4 ,while the discussion is undertaken with particular reference to the rewards of the business man1 it will also have an important bearing on the compensation of the wage earner4 ,the morality of rent and interest depends upon other principles than those governing the remuneration of human activity2 and it has been sufficiently treated in chapters xii and xiii4 ,the canons of distribution applicable to our present study are mainly six in number3 arithmetical equality2 proportional needs2 efforts and sacrifices2 comparative productivity2 relative scarcity2 and human welfare4 ,the ,canon of ,equality ,according to the rule of arithmetical equality1 all persons who contribute to the product should receive the same amount of remuneration4 ,with the exception of ,bernard ,shaw1 no important writer defends this rule to-day4 ,it is unjust because it would treat unequals equally4 ,although men are equal as moral entities1 as human persons1 they are unequal in desires1 capacities1 and powers4 ,an income that would fully satisfy the needs of one man would meet only #ge per cent41 or #ej per cent41 of the capacities of another4 ,to allot them equal amounts of income would be to treat them unequally with regard to the requisites of life and self development4 ,to treat them unequally in these matters would be to treat them unequally as regards the real and only purpose of property rights4 ,that purpose is welfare4 ,hence the equal moral claims of men which admittedly arise out of their moral equality must be construed as claims to equal degrees of welfare1 not to equal amounts of external goods4 ,to put the matter in another way1 external goods are not welfare2 they are only means to welfare2 consequently their importance must be determined by their bearing upon the welfare of the individual4 ,from every point of view1 therefore1 it is evident that justice in industrial distribution must be measured with reference to welfare rather than with reference to incomes1 and that any scheme of distribution which provided equal incomes for all persons would be radically unjust4 ,moreover1 the rule of equal incomes is socially impracticable4 ,it would deter the great majority of the more efficient from putting forth their best efforts and turning out their maximum product4 ,as a consequence1 the total volume of product would be so diminished as to render the share of the great majority of persons smaller than it would have been under a rational plan of unequal distribution4 ,the ,canon of ,needs ,the second conceivable rule is that of proportional needs4 ,it would require each person to be rewarded in accordance with his capacity to use goods reasonably4 ,if the task of distribution were entirely independent of the process of production1 this rule would be ideal2 for it would treat men as equal in those respects in which they are equal2 namely1 as beings endowed with the dignity and the potencies of personality2 and it would treat them as unequal in those respects in which they are unequal2 that is1 in their desires and capacities4 ,but the relation between distribution and production cannot be left out of account4 ,the product is distributed primarily among the agents of production only1 and it must be so distributed as to give due consideration to the moral claims of the producer as such4 ,the latter has to be considered not merely as a person possessing needs1 but as a person who has contributed something to the making of the product4 ,whence arise the questions of relative efforts and sacrifices1 and relative productivity4 ,since only those who have contributed to the product participate in the distribution thereof1 it would seem that they should be rewarded in proportion to the efforts and sacrifices that they exert and undergo4 ,as an example of varying effort1 let us take two men of equal needs who perform the same labour in such a way that the first expends #ij per cent4 of his energy1 while the second expends #fj per cent4 ,as an example of varying sacrifice1 let us take the ditch digger1 and the driver who sits all day on the dump wagon4 ,in both these examples the first man expends more painful exertion than the second4 ,this would seem to make a difference in their moral desert4 ,justice would seem to require that in each case compensation should be proportionate to exertion rather than to needs4 ,at any rate1 the claims of needs should be modified to some extent in favour of the claims of exertion4 ,it is upon the principle of efforts and sacrifices that we expect our eternal rewards to be based by the infinitely just ,rewarder4 ,the principle of needs is likewise in conflict with the principle of comparative productivity4 ,men generally demand rewards in proportion to their products4 ,the validity of this demand we shall examine in a subsequent paragraph4 ,like the rule of arithmetical equality1 the rule of proportional needs is not only incomplete ethically but impossible socially4 ,men's needs vary so widely and so imperceptibly that no human authority could use them as the basis of even an approximately accurate distribution4 ,moreover1 any attempt to distribute rewards on this basis alone would be injurious to social welfare4 ,it would lead to a great diminution in the productivity of the more honest1 the more energetic1 and the more efficient among the agents of production4 ,the ,canon of ,efforts and ,sacrifice ,the third canon of distribution1 that of efforts and sacrifices1 would be ideally just if we could ignore the questions of needs and productivity4 ,but we cannot think it just to reward equally two men who have expended the same quantity of painful exertion1 but who differ in their needs and in their capacities of self development4 ,to do so would be to treat them unequally in the matter of welfare1 which is the end and reason of all distribution4 ,consequently the principle of efforts and sacrifices must be modified by the principle of needs4 ,apparently it must also give way in some degree to the principle of comparative productivity4 ,when two men of unequal powers make equal efforts1 they turn out unequal amounts of product4 ,almost invariably the more productive man believes that he should receive a greater share of the product than the other4 ,he believes that the rewards should be determined by productivity4 ,it is evident that the rule of efforts and sacrifices1 like those of equality and needs1 could not be universally enforced in practice4 ,with the exception of cases in which the worker is called upon regularly to make greater sacrifices owing to the disagreeable nature of the task1 attempts to measure the amounts of effort and painful exertion put forth by the different agents of production would on the whole be little more than rough guesses4 ,these would probably prove unsatisfactory to the majority4 ,moreover1 the possessors of superior productive power would in most instances reject the principle of efforts and sacrifices as unfair1 and refuse to do their best work under its operation4 ,the three rules already considered are formally ethical1 inasmuch as they are directly based upon the dignity and claims of personality4 ,the two following are primarily physical and social2 for they measure economic value rather than ethical worth4 ,nevertheless1 they must have a large place in any system which includes the factor of competition4 ,the ,canon of ,productivity ,according to this rule1 men should be rewarded in proportion to their contributions to the product4 ,it is open to the obvious objection that it ignores the moral claims of needs and efforts4 ,the needs and use-capacities of men do1 indeed1 bear some relation to their productive capacities1 and the man who can produce more usually needs more2 but the differences between the two elements are so great that distribution based solely upon productivity would fall far short of satisfying the demands of needs4 ,yet we have seen that needs constitute one of the fundamentally valid principles of distribution4 ,between productivity on the one hand and efforts and sacrifices on the other1 there are likewise important differences4 ,when men of equal productive power are performing the same kind of labour1 superior amounts of product do represent superior amounts of effort2 when the tasks differ in irksomeness or disagreeableness1 the larger product may be brought into being with a smaller expenditure of painful exertion4 ,if men are unequal in productive power their products are obviously not in proportion to their efforts4 ,consider two men whose natural physical abilities are so unequal that they can handle with equal effort shovels differing in capacity by fifty per cent4 ,instances of this kind are innumerable in industry4 ,if these two men are rewarded according to productivity1 one will get fifty per cent4 more compensation than the other4 ,yet the surplus received by the more fortunate man does not represent any action or quality for which he is personally responsible4 ,it corresponds to no larger output of personal effort1 no superior exercise of will1 no greater personal desert4 ,it is based solely upon a richer physical endowment by the ,creator4 ,it is clear1 then1 that the canon of productivity cannot be accepted to the exclusion of the principles of needs and efforts4 ,it is not the only ethical rule of distribution4 ,is it a valid partial rule8 ,superior productivity is frequently due to larger effort and expense put forth in study and in other forms of industrial preparation4 ,in such cases it demands superior rewards by the title of efforts and sacrifices4 ,where1 however1 the greater productivity is due merely to higher native qualities1 physical or mental1 the greater reward is not easily justified on purely ethical grounds4 ,for it represents no personal responsibility1 will-effort1 or creativeness4 ,nevertheless1 the great majority of the more fortunately endowed think that they are unfairly treated unless they are recompensed in proportion to their products4 ,sometimes this conviction is due to the fact that such men wrongly attribute their larger product to greater efforts4 ,in very many cases1 however1 the possessors of superior productive power believe that they should be rewarded in proportion to their products1 regardless of any other principle or factor4 ,probably the true explanation of this belief is to be found in man's innate laziness4 ,while the prevalence of the conviction that superior productivity constitutes a just title to superior compensation1 does create some kind of a presumption in favour of its correctness1 it must be remembered that presumption is not proof4 ,weighing this presumption against the objective considerations on the opposite side of the argument1 we take refuge in the conclusion that the ethical validity of the canon of comparative productivity can neither be certainly proved nor certainly disproved4 ,like the rules of equality1 needs1 and efforts1 that of productivity cannot be universally enforced in practice4 ,it is susceptible of accurate application among producers who perform the same kind of work with the same kind of instruments and equipment2 for example1 between two shovellers1 two machine operators1 two bookkeepers1 two lawyers1 two physicians4 ,as a rule1 it cannot be adequately applied to a product which is brought into existence through a combination of different processes4 ,the engine driver and the track repairer contribute to the common product1 railway transportation2 the bookkeeper and the machine tender co-operate in the production of hats2 but we cannot tell in either case whether the first contributes more or less than the second1 for the simple reason that we have no common measure of their contributions4 ,sometimes1 however1 we can compare the productivity of individuals engaged in different processes2 that is1 when both can be removed from the industry without causing it to come to a stop4 ,thus1 it can be shown that a single engine driver produces more railway transportation than a single track repairer1 because the labour of the latter is not indispensable to the hauling of a given load of cars4 ,but no such comparison can be made as between the whole body of engine drivers and the whole body of track repairers1 since both groups are indispensable to the production of railway transportation4 ,again1 a man can be shown to exert superior productivity because he affects the productive process at more points and in a more intimate way than another who contributes to the product in a wholly different manner4 ,while the surgeon and the attendant nurse are both necessary to a surgical operation1 the former is clearly more productive than the latter4 ,when due allowance is made for all such cases1 the fact remains that in a large part of the industrial field it is simply impossible to determine remuneration by the rule of comparative productivity4 ,the ,canon of ,scarcity ,it frequently happens that men attribute their larger rewards to larger productivity1 when the true determining element is scarcity4 ,the immediate reason why the engine driver receives more than the track repairer1 the general manager more than the section foreman1 the floorwalker more than the salesgirl1 lies in the fact that the former kinds of labour are not so plentiful as the latter4 ,were general managers relatively as abundant as section foremen their remuneration would be quite as low2 and the same principle holds good of every pair of men whose occupations and products are different in kind4 ,yet the productivity of the general managers would remain as great as before4 ,on the other hand1 no matter how plentiful the more productive men may become1 they can always command higher rewards than the less productive men in the same occupation1 for the simple reason that their products are superior either in quantity or in quality4 ,men engaged upon the more skilled tasks are likewise mistaken when they attribute their greater compensation to the intrinsic excellence of their occupation4 ,the fact is that the community cares nothing about the relative nobility1 or ingenuity1 or other inherent quality of industrial tasks or functions4 ,it is concerned solely with products and results4 ,as between two men performing the same task1 superior efficiency receives a superior reward because it issues in a larger or better product4 ,as between two men performing different tasks1 superior skill receives superior compensation simply because it can command the greater compensation2 and it is able to do this because it is scarce4 ,in most cases where scarcity is the immediate determinant of rewards1 the ultimate determinant is1 partly at least1 some kind of sacrifice4 ,one reason why chemists and civil engineers are rarer than common labourers is to be found in the greater cost of preparation4 ,the scarcity of workers in occupations that require no special degree of skill is due to unusual hazards and unpleasantness4 ,in so far as scarcity is caused by the uncommon sacrifices preceding or involved in an occupation1 the resulting higher rewards obviously rest upon most solid ethical grounds4 ,however1 some part of the differences in scarcity is the result of unequal opportunities4 ,if all young persons had equal facilities of obtaining college and technical training1 the supply of the higher kinds of labour would be considerably larger than it now is1 and the compensation would be considerably smaller4 ,scarcity would then be determined by only three factors2 namely1 varying costs of training1 varying degrees of danger and unattractiveness among occupations1 and inequalities in the distribution of native ability4 ,as a consequence1 competition would tend to apportion rewards according to efforts1 sacrifices1 and efficiency4 ,how can we justify the superior rewards of that scarcity which is not due to unusual costs of any sort1 but merely to restricted opportunity8 ,so far as society is concerned1 the answer is simple3 the practice pays4 ,as to the possessors of the rarer kinds of ability1 they are in about the same ethical position as those persons whose superior productivity is derived entirely from superior native endowment4 ,in both cases the unusual rewards are due to factors outside the control of the recipients2 to advantages which they themselves have not brought into existence4 ,in the former case the decisive factor and advantage is opportunity2 in the latter it is a gift of the ,creator4 ,now we have seen that this sort of productivity cannot be proved to be immoral as a canon of distribution2 consequently the same statement will hold good of this sort of scarcity4 ,the ,canon of ,human ,welfare ,we say human welfare rather than social welfare1 in order to make clear the fact that this canon considers the well being of men not only as a social group1 but also as individuals4 ,it includes and summarises all that is ethically and socially feasible in the five canons already reviewed4 ,it takes account of equality1 inasmuch as it regards all men as persons1 as subjects of rights2 and of needs1 inasmuch as it awards to all the necessary participants in the industrial system at least that amount of remuneration which will meet the elementary demands of decent living and self development4 ,it is governed by efforts and sacrifices1 at least in so far as they are reflected in productivity and scarcity2 and by productivity and scarcity to whatever extent is necessary in order to produce the maximum net results4 ,it would give to every producer sufficient remuneration to evoke his greatest net contribution to the productive process4 ,greatest net contribution2 for a man's absolute maximum product may not always be worth the required price4 ,for example3 a man who for a salary of #bejj dollars turns out a product valued at #cjjj dollars1 should not be given #cjjj dollars in order to induce him to bring forth a product worth #ccjj dollars4 ,in this case a salary of #bejj dollars evokes the maximum net product1 and represents the reward which would be assigned by the canon of human welfare4 ,once the vital needs of the individual have been safeguarded1 the supreme guide of the canon of human welfare is the principle of maximum net results1 or the greatest product at the lowest cost4 ,it is not contended here that this canon ought never to undergo modification or exception4 ,owing to the exceptional hazards and sacrifices of their occupation1 a combination of producers might be justified in exacting larger compensation than would be accorded them by the canon of human welfare on the basis of net results in the present conditions of supply and scarcity4 ,unusual needs and capacities might also justify a strong group in pursuing the same course4 ,all that is asserted at present is that in conditions of average competition the canon of human welfare is not unjust4 ,and this is all that is necessary as a preliminary to the discussion of just profits4#afb ,,footnote3 #afb ,a very suggestive discussion of the psychology1 the general principles1 and the practical limitations of distributive justice1 will be found in an article by ,gustav ,schmoller1 entitled1 ,the ,idea of ,justice in ,political ,economy4 ,it is ,no4 #aac in the ,publications of the ,american ,academy of ,political and ,social ,science4 ,,chapter ,,xvii ,,just ,,profits ,,in ,,conditions ,,of ,,competition ,we have seen that profits are that share of the product of industry which goes to the business man4 ,they comprise that residual portion which he finds in his hands after he has made all expenditures and allowances for wages1 salaries1 interest at the prevailing rate on both his own and the borrowed capital1 and all other proper charges4 ,they constitute his compensation for his labour of direction1 and for the risks of his enterprise and capital4 ,in the opinion of most ,socialists1 profits are immoral because they are an essential element of an unjust industrial system1 and because they are not entirely based upon labour4 ,under ,socialism the organising and directing functions that are now performed by the business man1 would be allotted to salaried superintendents and managers4 ,their compensation would include no payment for the risks of capital1 and it would be fixed instead of indeterminate4 ,hence it would differ considerably from present-day profits4 ,to the assertion that profits are immoral a sufficient reply at this time is that ,socialism has already been shown to be impracticable and inequitable4 ,consequently the system of private industry is essentially just1 and profits1 being a necessary element of the system1 are essentially legitimate4 ,the question of their morality is one of degree not of kind4 ,it will be considered under two principal heads3 the right of the business man to obtain indefinitely large profits2 and his right to a certain minimum of profits4 ,the ,question of ,indefinitely ,large ,profits ,as a general rule1 business men who face conditions of active competition have a right to all the profits that they can get1 so long as they use fair business methods4 ,this means not merely fair and honest conduct toward competitors1 and buyers and sellers1 but also just and humane treatment of labour in all the conditions of employment1 especially in the matter of wages4 ,when these conditions are fulfilled1 the freedom to take indefinitely large profits is justified by the canon of human welfare4 ,the great majority of business men in competitive industries do not receive incomes in excess of their reasonable needs4 ,their profits do not notably exceed the salaries that they could command as hired managers1 and generally are not more than sufficient to reimburse them for the cost of education and business training1 and to enable them to live in reasonable conformity with the standard of living to which they have become accustomed4 ,efforts and sacrifices are reflected to some extent in the different amounts of profits received by different business men4 ,when all due allowance is made for chance1 productivity1 and scarcity1 a considerable proportion of profits is attributable to harder labour1 greater risk and worry1 and larger sacrifices4 ,like the principle of needs1 that of efforts and sacrifices is a partial justification of the business man's remuneration4 ,those profits which cannot be justified by either of the titles just mentioned1 are ethically warranted by the principles of productivity and scarcity4 ,this is particularly true of those exceptionally large profits which can be traced specifically to that unusual ability which is exemplified in the invention and adoption of new methods and processes in progressive industries4 ,the receivers of these large rewards have produced them in competition with less efficient business men4 ,while the title of productivity does not entirely satisfy the seeker for decisive ethical sanctions1 it is stronger morally than any opposing considerations that can be invoked4 ,it is probably as strong as some other principles that we have to accept as the best attainable in the very difficult field of industrial ethics4 ,nevertheless1 it would seem that those business men who obtain exceptionally large profits could be reasonably required to transfer part of their gains to their employs in the form of higher wages1 or to the consumers in the form of lower prices4 ,both of these methods have been followed by ,henry ,ford1 the automobile manufacturer4 ,neither of them is certainly demanded by the principles of strict justice2 they rest upon the feebler and less decisive principle of general equity or fairness4#afc ,this concept is less definite than those of charity and justice1 and stands midway between them4 ,it comes into operation when an action is obligatory on stricter grounds than those of charity1 and yet cannot with certainty be required on grounds of justice4 ,notwithstanding its vagueness1 it is sufficiently strong to make the average conscientious man feel uncomfortable if he neglects its prescriptions entirely4 ,it has1 therefore1 sufficient practical value to deserve a place in the ethics of distribution4 ,and it seems to have sufficient application to the problem before us to justify the statement that the receivers of exceptionally large profits are bound in equity to share them with those persons who have co-operated in producing and providing them1 namely1 wage earners and consumers4 ,in the field of profits the canon of human welfare is not only sound ethically but expedient socially4 ,it permits the great majority of business men to obtain1 if they can1 sufficient remuneration to meet their reasonable needs4 ,whether it requires society to guarantee at least this amount of profit-income is a question that we shall examine presently4 ,it encourages efforts1 and makes for the maximum social product by permitting business men to retain all the profits that they can get in conditions of fair competition4 ,does it forbid any attempt by society to limit exceptionally large profit-incomes8 ,if the limit were placed very high1 say1 at #ej1jjj dollars per year1 it would not apparently check the productive efforts of the great majority of business men1 since they never hope to pass that figure4 ,whether it would have a seriously discouraging effect upon the activity and ambition of those who do hope to reach1 and of those who have already reached that level1 is uncertain4 ,among business men who are approaching or who have passed the #ej1jjj dollars annual profit-income mark1 the desire to possess more money is frequently weaker as a motive to business activity than the longing for power and the driving force of habit4 ,at any rate1 the question is not very practical4 ,any sustained attempt to limit profits by law would require such extensive and minute supervision of business that the policy would prove to be socially intolerable and unprofitable4 ,the espionage involved in the policy would provoke general resentment1 and the amount of profits that could be diverted either to the ,state or to private persons would be relatively insignificant4 ,thus far we have been considering the independent business man and business firm1 not the joint stock company or corporation4 ,in the latter form of organisation1 the labour of direction is remunerated by fixed salaries to the executive officers1 while the risks of enterprise and capital are covered by the regular dividends received by the whole body of stockholders4 ,consequently the only revenues comparable to profits are the surplus gains that remain after wages1 salaries1 interest1 dividends1 rent1 and all other expenses and charges have been met4 ,these are apportioned through one process or another among the stockholders4 ,on what ethical principle can they be thus distributed8 ,the general principle of productivity1 or superior productivity1 is the only one available4 ,if a corporation which uses fair methods of competition can obtain surplus gains1 while the majority of its competitors fail to do so1 the cause must be sought in its superior business management4 ,this superiority must be credited to the whole body of stockholders1 even though the great majority of them are responsible for it only in a very remote way1 through their selection of the executive officers4 ,the stockholders surely have a better claim to these surplus gains than any other group in the community4 ,at the same time1 they are1 like the independent business man1 bound by the principle of equity to share the surplus with the labourers and consumers4 ,the ,question of ,minimum ,profits ,has the business man a strict right to a minimum living profit8 ,in other words1 have all business men a right to a sufficient volume of sales at sufficiently high prices to provide them with living profits or a decent livelihood8 ,such a right would imply a corresponding obligation upon the consumers1 or upon society1 to furnish the requisite amount of demand at the required prices4 ,is there such a right1 and such an obligation8 ,no industrial right is absolute4 ,they are all conditioned by the possibilities of the industrial system1 and by the desires1 capacities1 and actions of the persons who enter into industrial relations with one another4 ,as we shall see later1 this statement is true even of the right to a living wage4 ,when the industrial resources are adequate1 all persons of average ability who contribute a reasonable amount of labour to the productive process have a right to a decent livelihood on two conditions3 first1 that such labour is their only means of sustenance2 and1 second1 that their labour is economically indispensable to those who utilise it or its product4 ,economically indispensable means that the beneficiary of the labour would rather give the equivalent of a decent livelihood for it than go without it4 ,while both these conditions are apparently fulfilled in the case of the great majority of wage earners1 they are only rarely realised with regard to business men4 ,in most instances the business man who is unable to make living profits could become an employ1 and thus convert his right to a decent livelihood into a right to a living wage4 ,even when no such alternative is open to him1 he cannot claim a strict right to living profits1 for the second condition stated above remains unfulfilled4 ,the consuming public does not regard the business function of such men as economically indispensable4 ,rather than pay the higher prices necessary to provide living profits for the inefficient business men1 consumers will transfer their patronage to the efficient competitors4 ,should the retail grocer1 for example1 raise his prices in the effort to get living profits1 his sales would fall off to such an extent as to reduce his profits still lower4 ,while the consumers may be willing to fulfil their obligation of furnishing living profits for all necessary grocers1 they are not willing1 nor are they morally bound1 to do so in the case of grocers whose inability to command sufficient patronage at remunerative prices shows that they are not necessary to the community4 ,the consuming public does not want to employ such business men at such a cost4 ,nor is the ,state under obligation to ensure living profits for all business men4 ,to carry out such a policy1 either by enforcing a sufficiently high level of prices1 or by subsidising those who fail to obtain living profits1 would be to compel the public to support inefficiency4 ,in the foregoing paragraphs we have assumed that the inability of the business men under consideration to get living profits is due to their own lack of capacity as compared with their more efficient competitors4 ,when1 however1 their competitors are not more efficient1 but are enabled to undersell through the use of unfair methods1 such as adulteration of goods and oppression of labour1 a different moral situation is presented4 ,honest and humane business men undoubtedly have a claim upon society to protection against such unfair competition4 ,and the consumers are under obligation to make reasonable efforts to withhold their patronage from those business men who practise dishonesty and extortion4 ,the ,question of ,superfluous ,business ,men ,although we have rejected as impractical the proposal to set a legal limit to profit-incomes1 we have to admit that many of the abler business men would continue to do their best work even if the profits that they could hope to obtain were considerably smaller in volume4 ,these men hold a strategic position in industry1 inasmuch as they are not subject to the same degree of constant competition as the other agents of production4#afd ,were the supply of superior business capacity more plentiful1 their rewards would be automatically reduced1 and the burden of profits resting upon society would be to that extent diminished4 ,on the other hand1 the number of mediocre business men1 especially in the distributive industries1 is much larger than is necessary to supply the wants of the community4 ,this constitutes a second unnecessary volume of payments under the head of profits4 ,is there no way by which these wastes can be reduced8 ,the volume of exceptionally large profits could be diminished by an extension of the facilities of technical and industrial education4 ,thus the number of persons qualifying as superior business men could be gradually increased1 competition among this class of men would be intensified1 and their rewards correspondingly diminished4 ,the profits that go to superfluous business men1 especially in the class known as middlemen1 can be largely eliminated through combination and co-operation4 ,the tendency to unite into a single concern a large number of small and inefficient enterprises should be encouraged up to the point at which the combination threatens to become a monopoly4 ,that this process is capable of effecting a considerable saving in business profits as well as in capital1 has been amply demonstrated in several different lines of enterprise4 ,as we have seen in a preceding chapter1 the co-operative movement1 whether in banking1 agriculture1 or stores1 has been distinctly successful in reducing profits4 ,millions of dollars are thus diverted every year from unnecessary profit-receivers to labourers1 consumers1 and to the man of small resources generally4 ,yet the co-operative movement is only in its infancy4 ,it contains the possibility of eliminating entirely the superfluous business man1 and even of diminishing considerably the excessive profits of the exceptionally able business man4 ,,footnotes3 #afc ,cf4 pp4 #bab1 #bac of ,castelein's ,philosophia ,moralis et ,socialis4 #afd ,cf4 ,hobson1 ,the ,industrial ,system1 chapter on ,ability4 ,,chapter ,,xviii ,,the ,,moral ,,aspect ,,of ,,monopoly ,the conclusion was drawn in the last chapter that the surplus gains of corporations operating in conditions of competition1 can justly be retained by the stockholders as the remuneration of exceptional productive efficiency4 ,it is1 of course1 to be understood that the proper allowance for interest on the capital is not necessarily the amount authorised by the stipulated rate of dividend on the stock1 but the prevailing or competitive rate of interest plus an adequate rate of insurance against the risks of the enterprise4 ,if the prevailing rate of interest is five per cent41 and the risk is sufficiently protected by an allowance of one per cent41 the fair rate of return on the investment is six per cent4 ,the fact that a concern may actually award its stockholders ten per cent4 dividends1 has no bearing on the determination of the genuine surplus4 ,if the actual surplus that remains after paying all other charges and allowing ten per cent4 on the stock1 is only #ej1jjj dollars1 whereas it would be #ajj1jjj dollars with an allowance of only six per cent41 then the true surplus gains1 or profits1 are the latter amount not the former4 ,no part of the #ajj1jjj dollars can be justified as interest on capital4 ,it must all find its justification as profits proceeding from superior productivity4 ,bearing in mind this distinction between the actual rate of dividend and the proper allowance for interest on capital1 we take up the question of the morality of profits or surplus gains in conditions of monopoly4 ,surplus and ,excessive ,profits ,several of the great industrial combinations of the ,united ,states have obtained profits which are commonly stigmatised as excessive4 ,for example1 the ,standard ,oil ,company paid1 from #ahhb to #aijf1 an average annual dividend of #bd4ae per cent4 on the capital stock1 and had profits in addition at the rate of about #h per cent4 annually2#afe from #aijd to #aijh the ,american ,tobacco ,company averaged #ai per cent4 on its actual investment2#aff and the ,united ,states ,steel ,corporation obtained an average annual return of #ab per cent4 on its investment from #aija to #aiaj4afg ,a complete list of the ,american monopolies that have reaped more than the competitive rate of return on their capital would undoubtedly be a very long one4 ,is it possible to justify such returns8 ,has a monopoly a right to take surplus gains8 ,let us suppose a concern which is getting #ae per cent4 on its investment4 ,inasmuch as the risks are smaller than in competitive enterprises1 six per cent4 is an ample allowance for interest4 ,of the remaining #i per cent41 #d per cent41 we shall assume1 is derived from economies of production as compared with the great majority of competitive concerns4 ,this portion of the surplus1 being the reward of superior efficiency1 may be retained by the owners of the monopoly quite as justly as similar gains are taken by the exceptionally efficient corporation in conditions of competition4 ,the objection that the monopoly ought to share these gains with the public1 since it limits individual opportunity in a socially undesirable way1 has some merit1 but it can scarcely be urged on grounds of strict justice4 ,at most it points only to an obligation in equity4 ,by what canon of distribution can the retention of the other #e per cent4 of surplus gain be justified8 ,not by the titles of needs and efforts1 for these have already been satisfied through the salaries paid to those stockholders who perform labour in the management of the concern4 ,these titles afford no basis for any other claim than that which proceeds from labour4 ,they cannot be made to justify claims made on behalf of capital4 ,not by the title of productivity1 for this has already been remunerated in the #d per cent4 just considered4 ,not as interest on capital1 for ample allowance has already been made under this head in the original #f per cent4 ,as we have seen in an earlier chapter1 the only reasons that give ethical support to interest on capital are the sacrifice that is involved in some kinds of saving1 the possibility that interest is necessary in order to induce the provision of sufficient capital1 the certainty that the ,state would be unable to enforce the abolition of interest1 and some presumptive considerations4 ,since all of these reasons and ends are satisfied by the competitive rate of interest1 none of them will justify the exaction of more than the competitive rate4 ,it is not possible to justify a higher rate on either social or individual grounds4 ,therefore1 the only basis that is left upon which to defend the retention of the five per cent4 surplus that we are discussing1 is the power of appropriation4 ,the monopoly possesses the economic strength to take this five per cent4 because it is able to impose higher than competitive prices upon the consumer4 ,obviously such power has no greater ethical sanction or validity than the pistol of the highwayman4 ,in both cases the gains are the product of extortion4 ,the conclusion that men have no right to more than the competitive rate of interest1 as interest1 on their capital1 and that a monopoly has consequently no right to those surplus gains that are not produced by superior efficiency1 is confirmed by public opinion and by the decisions of the courts4 ,the monopolistic practice of taking more than the usual rate of returns on capital merely because there exists the power to take it1 is universally condemned as inequitable4 ,in fixing the charges of public service corporations1 the courts with practical unanimity allow only the rate of return that is obtainable in competitive conditions of investment4 ,the statement that the monopoly may retain those surplus gains which are derived from superior efficiency assumes1 of course1 that fair wages have been paid to employs1 and fair prices to the sellers of materials1 and that fair methods have been used toward competitors4 ,in so far as any of these conditions is not met1 the monopolistic concern has no right to surplus gains of any sort4 ,all three of the claims just mentioned are morally stronger than the claim to superior rewards because of superior efficiency4 ,the ,question of ,monopolistic ,efficiency ,so much for the moral principle4 ,what proportion of the surplus gains of monopoly are due to extortionate prices rather than to economies in production1 cannot be known even approximately4 ,according to ,justice ,brandeis1 who is one of the most competent authorities in this field1 only a very small part of these gains are derived from superior efficiency4#afh ,professor ,e4 ,s4 ,meade writes3 ,during a decade #aijb-aiab of unparalleled industrial development1 the trusts1 starting with every advantage of large capital1 well-equipped plants1 financial connections1 and skilled superintendence1 have not succeeded4#afi ,on the other hand1 ,president ,van ,hise thinks that1 the weight of argument is strongly in favour of the increased efficiency of large combinations of industry on the average4#agj ,the difference of opinion existing among students of this subject is due to lack of adequate data1 particularly to the absence of such uniform and comprehensive systems of accounting as would be required to provide a basis for reliable general conclusions4 ,opposing particular statements may be equally true1 because based upon different instances2 but general statements are little better than guesses4 ,let us approach the question from another side1 that of prices4 ,whenever the charges imposed by monopolistic concerns upon their products are higher than those that would have prevailed under competition1 the surplus gains are obviously to that extent not due to superior efficiency4 ,they have their source in the arbitrarily made prices4 ,the ,final ,report of the ,united ,states ,industrial ,commission1 which was made at the beginning of the year #aijb1 declared that1 in most cases the combination has exerted an appreciable power over prices1 and in practically all cases it has increased the margin between raw materials and finished products4#aga ,since the cost of production had decreased during the preceding decade1 this increase in the margin1 and the ensuing increased profits1 necessarily involved an increase in prices to the consumer4 ,taking the period of #ahig-aiaj1 and comparing the movement of prices between eighteen important trust-controlled products1 and the same number of important commodities not produced by monopolistic concerns1 ,professor ,meade concluded that the former were sold at a much lower relative level than the latter4#agb ,his computations were based upon figures compiled by the ,bureau of ,labour4 ,according to the ,commissioner of ,corporations1 the ,standard ,oil ,company has taken advantage of its monopoly power to extort prices much higher than would have existed under free competition4#agc ,the same authority shows that the ,american ,tobacco ,company used its power to obtain considerably more than competitive prices on some of its products4#agd ,excessive prices1 as measured by the standards of competition1 were also established by the ,united ,states ,steel ,corporation1 the ,american ,sugar ,refining ,company1 and the combinations in meat packing and in lumber4#age ,a safe statement would probably be that the greater part of the surplus gains of the most conspicuous ,american monopolies have been due to excessive prices rather than to economies of production4 ,let us turn from the subject of unjust monopoly gains to that of unfair methods used by the great combinations toward their competitors4 ,these methods are mainly three3 discriminative underselling1 exclusive-selling contracts1 and advantages in transportation4 ,discriminative ,underselling ,the first of these practices is exemplified when a monopoly sells its goods at unprofitably low rates in competitive territory1 while maintaining higher prices elsewhere2 and when it offers at very low prices those kinds of goods which are handled by competitors1 while holding at excessively high prices the kinds of commodities over which it has exclusive control4 ,both forms of the practice seem to have been extensively used by most of the monopolistic concerns of ,america4#agf ,the ,standard ,oil ,company has been perhaps the most conspicuous offender in this field4#agg ,this practice is unjust because it violates the fundamental moral principle that a man has a right to pursue a lawful good without hindrance through illicit means4 ,among the illicit means enumerated by the moral theologians are force1 fraud1 deception1 lying1 slander1 intimidation1 and extortion4#agh ,the illicit means employed in discriminative underselling are chiefly extortion and deception4 ,if the very low prices at which the monopoly sells in the field which contains competitors were maintained outside of that field also1 and if they were continued not merely until the independent concerns were driven out of business1 but indefinitely afterward1 no injustice would be done the latter4 ,for no man has a natural right to any particular business4 ,if a powerful concern can eliminate competitors through low prices made possible by superior efficiency1 the competitors are not unjustly treated4 ,they have no more just cause of complaint than the inefficient grocer whose custom is attracted from him by other and more efficient merchants4 ,the offence is at the worst contrary to charity4 ,but when the monopoly maintains the low and competition-eliminating prices only locally and temporarily1 when it is enabled to establish and continue these prices only because it sells its goods at extortionate rates elsewhere1 the latter prices are evidently the instrument or means by which the competitors are injured and eliminated4 ,in that case the monopoly violates the right of the competitors to pursue a lawful good immune from unfair interference4 ,the lawful good is a livelihood from this kind of business2 and the illicit interference is the unjust prices maintained outside the competitive field4 ,in the preceding paragraph we have assumed that the extortionate prices are operative at the same time as the excessively low prices1 but in a different place4 ,suppose that the former are imposed only after the independent concerns are eliminated4 ,the injustice to the competitors remains the same as in the preceding case4 ,although the extortionate prices are later in time1 they are the instrumental cause of the destructive low prices through which the competitors were driven out of business4 ,if the owners of the monopoly were not certain of their ability to establish the subsequent extortionate prices1 they would not have put into effect the unprofitably low prices4 ,hence there is a true causal connection between the former and the latter4 ,although the connection is mainly psychical1 through the consciousness of the monopoly owners1 it is none the less real and effective4 ,its practical effectiveness is seen in the fact that the subsequent possibility of imposing extortionate prices will induce men to lend the monopoly money to carry on the process of exterminating competition4 ,the process is maintained by means of the extortionate prices quite as effectively as though the two things were simultaneous4 ,in so far as the patrons of the independent concerns are deceived into expecting that the very low prices will be permanent1 and in so far as this impression causes them to withdraw their patronage from the independents1 the latter are injured through another illicit means1 namely1 deception4 ,the competitors have a right not to be deprived of their customers through imposture4 ,what is the measure of extortionate prices in this connection8 ,how can we know that the high1 competition-eliminating prices are really extortionate8 ,there are only two possible tests of just price4 ,the first is the proper cost of production1--fair wages to labour1 fair prices for materials1 and fair interest on capital4 ,if the monopoly does not raise prices above this level1 it obviously does not impose extortionate prices1 nor inflict injustice upon the eliminated competitor4 ,moreover1 if the monopoly has introduced economies of production it may1 as we have seen1 justly charge prices somewhat above the cost-of-production level4 ,but it may not raise them above the level that would have prevailed under competition4 ,this is the second test of just price4 ,no possible justification can be found1 except one to be mentioned presently1 for charging the consumers higher prices than they could have obtained under competitive conditions4 ,at such prices the monopoly will be able to secure the prevailing rate of interest on its capital1 and all the surplus gains that proceed from superior efficiency4 ,a higher scale of prices will be1 therefore1 extortionate1 and the competitors who are eliminated through its instrumentality will be the victims of injustice4#agi ,the exception alluded to above occurs when the monopoly uses the excess which it obtains over the competitive price to pay fair wages to those labourers who were insufficiently compensated in competitive conditions4 ,in such a case the eliminated competitors would have no just claim against the monopoly2 for their elimination took place in the just interest of the producers4 ,the case1 however1 is purely academic1 since the discriminative underselling practised by our monopolistic concerns has not been impelled by any such motive1 nor has it achieved any such result4 ,exclusive-,sales ,contracts ,the second unfair method employed by monopolies toward competitors is that of exclusive-selling contracts1 sometimes called the factor's agreement4 ,it requires the dealer1 merchant1 or jobber to refrain from selling the goods produced by independent concerns1 on penalty of being refused the goods produced by the monopoly4 ,the merchant is compelled to choose between the less important line of wares to be had from the former1 and the more important line obtainable from the latter4 ,he will not be permitted to handle both4 ,here is somebody who has been buying goods1 let us say1 by way of illustration1 from the ,american ,tobacco ,company1 and a rival producer comes in whom the merchant likes to patronise4 ,he buys goods for a time from the rival1 and an agent of the trust sends him a note to the effect that he must not buy any more from that rival corporation2 that1 if he does so1 the trust will give all of its own goods1 some of which the merchant is obliged to have1 to another agent4 ,that will probably bring him to terms4#ahj ,by this method the independent manufacturer can be deprived of sufficient patronage to injure him seriously1 and perhaps to drive him out of business4 ,this process is one of intimidation brought to bear upon the merchant4 ,through fear of loss he is compelled to discontinue selling the goods of the competing manufacturer4 ,it is a kind of secondary boycott4 ,as such1 it is an unreasonable interference with the liberty of the merchant unless its object is to compel him to do something that he may be reasonably required to do4 ,in the case that we are considering1 the object of the pressure is not of that character2 for to drive the rival manufacturer out of business1 or to assist in his expulsion1 is not a reasonable thing4 ,the exclusive-selling contract which is forced upon the merchant is quite as unreasonable as though its purpose were to prevent him from1 say1 patronising manufacturers having red hair4 ,being thus unreasonable1 thus injurious to individual liberty1 it violates not only the law of charity but that of justice4 ,it transgresses the merchant's right to enter reasonable contracts with the rival manufacturer1 and if it results in a pecuniary loss to the former it is an invasion of his rights of property4 ,it likewise violates the rights of the competitive manufacturer1 since it is among the unfair means which may not be used to prevent a man from pursuing a legitimate good4 ,it is an unfair means because it involves unreasonable intimidation1 uncharity1 and injustice toward the merchant4 ,when the independent manufacturer is injured through such an instrumentality1 he suffers injustice quite as certainly at the hands of the monopoly as though his property were destroyed through the strong-arm methods of hired thugs4 ,discriminative ,transportation ,arrangements ,concerning the third unfair method1 discriminative advantages in transportation1 the ,united ,states ,industrial ,commission declared3 ,it is incontestable that many of the great industrial combinations had their origin in railroad discrimination4 ,this has been emphasised many times in the history of the ,standard ,oil ,company1 and of the great monopolies dealing in live stock1 dressed beef1 and other products4#aha ,the ,american ,sugar ,refining ,company has been several times convicted of receiving illegal favours from railroads1 and has paid in fines thousands upon thousands of dollars4 ,sometimes the monopoly has openly been accorded lower freight rates than its competitors1 and sometimes it has paid the regular charges1 and then received back a part of them as a refund or rebate4 ,at one time the ,standard ,oil ,company obtained rebates not only on its own shipments1 but on those of its rivals6#ahb ,special advantages of this sort necessarily involve injustice to the competitors of the monopoly4 ,if the low rates given to the monopolistic concern are a sufficiently high price for the service of carrying freight1 the higher charges imposed upon the competing concerns are extortionate2 if the former rates are unprofitably low1 the difference between sufficient and insufficient freight charges is made up by the independent concerns4 ,in the former case the independents pay the railroad too much2 in the latter case they bear burdens that should properly rest upon the monopoly4 ,the monopolistic concern is partly responsible for this injustice inasmuch as it urges and often intimidates the railroad to establish the discriminating rates4 ,all three of the practices that we have been considering are universally condemned by public sentiment4 ,they are all likewise under the ban of statutory law4 ,the first two have recently received detailed and explicit prohibition in the ,clayton ,anti-,trust ,act4 ,natural ,monopolies ,up to this point we have been dealing with private and artificial monopolies4 ,we turn now to consider briefly those natural and quasi-public monopolies which are either tacitly or explicitly recognised as monopolies by public authority1 and whose charges are to a greater or less extent regulated by some department of the ,state4 ,such are1 for example2 steam railroads and municipal utilities4 ,when the charges made for the services of these corporations are adequately regulated by public authority1 the owners of such concerns will have a right to all the surplus gains that they can obtain4 ,in that case a contract is made between the corporation and the public which is presumably fair to both parties1 and which represents the social estimate of what is just4 ,if the public authorities have not sufficiently safeguarded the interests of the people1 if they have permitted the charges to be so high as to provide excessive returns for the corporation1 the latter is under no moral obligation to refrain from reaping the full benefit of the ,state's negligence or incompetence4 ,if1 however1 the unduly high rates have been brought about through bribery1 extortion1 or deception practised by the corporation1 the inequitable contract thus arranged will not justify the surplus gains thus produced4 ,for example2 if the corporation deliberately and effectively conceals the real value of its property through stockwatering1 and thus misleads the public authority into permitting charges which return twelve instead of six per cent4 on the actual investment1 the corporation cannot forthwith justly claim the surplus gain represented by the extra six per cent4 ,when the public authorities either fail entirely to regulate charges1 or do so only spasmodically and partially1 the quasi-public monopoly will not necessarily have a right to all the obtainable surplus gains4 ,for a long time the express companies of the ,united ,states were permitted to exact what charges they pleased1 and even yet the rates on some of our railroads are not adequately regulated by the ,state4 ,in such cases the charges imposed on the public are not an adequate expression of the social estimate of justice1 nor an adequate basis of legitimate surplus gains4 ,in the absence of sufficient public regulation1 a quasi-public monopoly is morally bound to fix its charges at such a level as will enable it to obtain only the prevailing rate of interest on the investment1 and such surplus gains as it can produce through exceptional efficiency4 ,in all such cases the public service corporation is in the same moral position as the artificial monopoly3 it has no possible basis except superior efficiency for claiming or getting any returns above the competitive rate of interest on its capital4 ,its only possible reason for obtaining more is the fact that it has the power to take more4 ,this fact has obviously no moral validity4 ,methods of ,preventing ,monopolistic ,injustice ,how shall the injustices of monopoly be prevented in the future8 ,so far as quasi-public monopolies are concerned1 all students of the subject are now agreed that these should be permitted to exist under adequate governmental regulation as to prices and service4 ,the reason is that in this field successful and useful competition is impossible4 ,public utility corporations are natural monopolies1 and must be dealt with by the method of regulation until such time as they are brought under the ownership and operation of the ,state4 ,with regard to the great industrial combinations which have become or threaten to become artificial monopolies1 there exists substantial agreement among competent authorities on one point1 and disagreement on another point4 ,all admit that the unfair competitive methods described in an earlier part of this chapter should be stringently prohibited4 ,no possible reason can be found for legal toleration of these or any other discriminative1 uncharitable1 or unjust practices on the part of stronger toward weaker competitors4 ,the disagreement among students of monopoly relates to the fundamental question of permitting or not permitting these combinations to exist4 ,according to the first theory1 of which ,mr4 ,justice ,brandeis is the most distinguished exponent1 no new industrial monopolies should be permitted1 and those that we have should be dissolved4 ,the basis of this theory is the assumption that all the economies and all the productive efficiency found in monopolistic concerns can be developed and maintained in smaller business organisations1 and that the method of prevention and dissolution is the simplest means of protecting the public against the danger of extortionate monopoly prices4 ,attention has been called in a preceding paragraph to the impossibility of determining whether the great monopolistic combinations have on the average shown themselves to be more efficient than concerns subject to active and adequate competition4 ,it is significant1 however1 that in the discussion of this subject which took place at the twenty-sixth annual meeting of the ,american ,economic ,association1 at ,minneapolis in #aiac1 the economists who participated were practically unanimous in holding that the superior efficiency of the trusts had not been demonstrated1 but was a matter of serious doubt1 and that the burden of proof of their alleged superiority had been definitely shifted upon those who maintained the affirmative4#ahc ,probably the great majority of the whole body of ,american economists would share these conclusions4 ,on the other hand1 the opponents of prevention and dissolution1 of whom ,mr4 ,george ,w4 ,perkins is probably the most conspicuous1 point to the obvious economies of large-scale over small-scale production1 and contend that these are sufficient reason for permitting and even encouraging the great combinations4 ,the power to oppress competitors by unjust methods of business1 and the public by extortionate prices1 should be kept under rigid control by supervision1 and government regulation of maximum prices4 ,but the arguments advanced in favour of this position are never conclusive4 ,most of its advocates fail to realise1 or at least to take adequately into account1 the difference between large-scale production and production by a monopoly4 ,while the large plant and the large business organisation have in many lines of manufacture and trade a considerable advantage over the small plant and the small organisation1 there is not a scintilla of evidence to show that the efficiency of magnitude increases indefinitely with magnitude4 ,there is no proof that the maximum efficiency is reached only with the maximum size of the business unit4 ,on the contrary1 all the evidence that we have points to the conclusion that in every field of industrial and commercial enterprise1 all the economies of magnitude and of combination are obtained long before the concern becomes a monopoly4 ,there is not an industry of any importance in the ,united ,states in which all the advantages of bigness and concentration cannot be made operative in concerns that control as low as twenty-five per cent4 of the total product4 ,the highest economy and efficiency can be obtained without monopoly4 ,indeed1 this is admitted by the more reasonable advocates of the regulation and price-fixing policy4 ,while maintaining that concentration must go far in order to give the maximum of efficiency1 ,president ,van ,hise does not hold that it should go to the extent that the element of monopoly enters2 and he would have the law declare restraint of trade unreasonable that gets to monopoly1 and fix the definite per cent4 of business control which constitutes a monopoly4#ahd ,we are justified1 therefore1 in concluding that the theory of prevention and dissolution 7provided that the competing units are not made so small as to destroy the certain economies of magnitude7 rather than the theory of permission and regulation1 indicates the sound economic and social policy of dealing with monopolies4 ,legalised ,price ,agreements ,president ,van ,hise advocates the regulation policy in a modified form4 ,in substance his view is that1 while no corporation should be permitted to control the greater part of any product1 monopolistic price-agreements should be sanctioned and regulated by law4 ,no amount of restrictive legislation1 he maintains1 can secure universal competition in the matter of prices4 ,experience shows that the destructive results of cut-throat competition compel the more powerful competitors to make price agreements in some lines of business4#ahe ,for example2 all the retail grocers in a city are often found selling certain staples at a uniform price for long periods of time4 ,agreements of this sort should1 in the opinion of ,president ,van ,hise1 be formally permitted by law1 with the proviso that a government commission should fix the maximum and possibly the minimum limits4 ,and he contends that the task of fixing fair maximum and minimum prices would be much less difficult than is commonly supposed1 and that it would be much simpler and easier than the task of regulating railway freight rates4 ,whatever may be the merits of this plan1 it is not likely to be embodied in legislation in the near future4 ,so far as we can see now1 the ,american people are committed to the policy of endeavouring to restore genuine competition by prohibiting those predatory practices to which the great monopolies mainly owe their existence4 ,the attempt will be made to give competition a fair opportunity to prevent both monopolistic control of products and monopolistic fixing of prices4 ,competition has not enjoyed any such opportunity during the last quarter of a century4 ,if this attempt should fail after a thorough trial1 the time will be at hand for the regulation of prices by the government4 ,until that time has arrived 7let us hope that it never will arrive7 the ,state will not1 and should not1 embark upon such a large and difficult experiment4 ,,footnotes3 #afe ,report of the ,commissioner of ,corporations on the ,petroleum ,industry1 ,,ii1 #dj1 #da4 #aff ,report of the ,commissioner of ,corporations on the ,tobacco ,industry1 ,,ii1 #bf-cd4 #afg ,report of the ,commissioner of ,corporations on the ,steel ,industry1 ,i1 #ea4 ,according to ,f4 ,j4 ,mc,rae1 the expert accountant for the ,stanley congressional investigating committee1 this concern secured #dj per cent4 on the cost of its property4 #afh ,hearings ,before the ,interstate ,commerce ,committee1 ,u4 ,s4 ,senate1 ,part ,,xvi1 pages #aadf-aaff4 #afi ,the ,journal of ,political ,economy1 ,april1 #aiab1 p4 #cff4 #agj ,concentration and ,control1 p4 #bj4 #aga ,page #fba4 #agb ,the ,journal of ,political ,economy1 ,april1 #aiab1 p4 #cfc4 #agc ,report on the ,petroleum ,industry1 ,,ii1 #gd4 #agd ,report on the ,tobacco ,industry1 ,,ii1 #bg4 #age ,cf4 ,van ,hise1 op4 cit41 pp4 #adj1 #adi1 #aec1 #aei4 #agf ,final ,report of the ,industrial ,commission1 pp4 #ffj-ffb4 #agg ,report on the ,petroleum ,industry1 ,i1 #cbh-ccb4 #agh ,cf4 ,lehmkuhl1 ,theologia ,moralis1 ,i1 ,no4 #igd4 #agi ,it may be of interest to recall the medival attitude toward monopolistic exactions1 as summarily stated by ,st4 ,antoninus1 who was archbishop of ,florence in the first half of the fifteenth century3 ,when monopolist merchants agree together to preserve a fixed price1 so as to secure an unlimited profit1 they are guilty of sinful trading4 ,he maintained that they should not sell above the market price1 and should be prevented from so doing by law4 ,see his ,summa ,theologica1 ,,iii1 #h1 #c1 iv1 and ,,ii1 #a1 #af1 ii4 ,present day moral theologians lay down the same doctrine1 and in addition condemn the characteristic monopolistic methods as unjust4 ,see ,tanquerey1 ,de ,justitia1 nos4 #ggf1 #ggg2 ,lehmkuhl1 ,theologia ,moralis1 vol4 ,i1 no4 #aaai4 #ahj ,clark1 ,the ,problem of ,monopoly1 p4 #ce4 #aha ,final ,report1 p4 #cfa4 #ahb ,report on the ,petroleum ,industry1 pp4 #bb1 #bc4 #ahc ,papers and ,proceedings1 pp4 #aeh-aid4 #ahd ,op4 cit41 pp4 #bj1 #bea4 #ahe ,op4 cit41 pp4 #bed-bfe4 ,,chapter ,,xix ,,the ,,moral ,,aspect ,,of ,,stock ,,watering ,in the last chapter we saw that a monopoly has no right to gains in excess of the competitive rate of interest on its capital1 except in so far as these have been derived from superior efficiency4 ,now superior efficiency is clearly present whenever the monopolistic concern obtains surplus gains by selling its product at competitive prices1 or at the prices that would have prevailed under competition4 ,evidently the surplus in such a case is due to the greater productivity of the monopoly as compared with the average productivity of competitive concerns4 ,when1 however1 the monopoly charges prices above the competitive level1 its surplus gains cannot all be attributed to unusual efficiency4 ,a part if not all of them are the result simply of the power to take2 consequently they are immoral4 ,one of the means by which some monopolies have obtained unjust surplus gains is overcapitalisation1 or stockwatering4 ,this practice is rarely found in businesses that are subject to normal competition4 ,so far as the consumer is concerned1 a corporation that cannot fix prices arbitrarily has nothing to gain by inflating its capital4 ,unless it develops exceptional efficiency1 it cannot hope to obtain more than the competitive rate of interest on its capital2 if it does become exceptionally efficient1 it can take the resulting surplus gains without arousing public resentment or criticism4 ,in either case1 it will have no sufficient reason to deceive the public by exaggerating the amount of its capital4 ,when a competitive concern does water its stock1 the object will be to defraud investors4 ,if the scheme is successful the unjust surplus gains are taken by one set of stockholders from another set of stockholders4 ,whenever anything of this sort occurs1 the deceptive devices employed are so crude and obvious that they present no special problem for the moralist4 ,even as practised by monopolies1 stockwatering raises no principle that has not been already discussed4 ,it does1 however1 create some special difficulties in the matter of applying the moral principles involved4 ,consequently1 it may with advantage be considered in a separate chapter4 ,the general definition of overcapitalisation is capitalisation in excess of the proper valuation of a business4 ,what is the measure of proper valuation8 ,according to many corporation directors1 it is earning power4 ,if a concern is able to get the prevailing rate of interest on a capitalisation of ten million dollars1 that is the proper capitalisation for that concern1 even though the money actually invested might not have exceeded five million dollars4 ,in the opinion of most other persons1 however1 a company is overcapitalised when the face value of its securities is greater than the money put into the business plus the subsequent enhancement in the value of its land4 ,the money put into the business1 means that which has been expended for labour1 materials1 land1 equipment1 and all other items and costs of organising the concern1 together with the sum that is necessary to cover the interest not obtained by the investors during the preparatory period before the business became productively operative4 ,the increase in the value of the land after its acquisition by the company also deserves a place in the legitimate valuation1 and may reasonably be represented by an appropriate amount of securities4 ,monopolistic corporations have as good a right1 generally speaking1 to profit by the unearned increment of land as competitive concerns4 ,in brief1 the proper measure of capitalisation is cost3 either the original cost1 as just explained and supplemented2 or the present cost of reproducing the business4 ,injurious ,effects of ,stockwatering ,stockwatering can become an instrument of unjust gains in two ways3 first1 through fraud inflicted upon some of the investors2 second1 through the imposition of exorbitant prices upon the consumers4 ,the former cannot occur so long as the process of inflation does not go beyond earning power2 for in that case all stockholders1 barring dishonest manipulation of the company's receipts1 will obtain the normal rate of interest on their investment4 ,if1 however1 stock is sold in excess of the earning power of the concern1 those stockholders who fail to obtain the ordinary rate of interest on their money are unjustly treated in so far as they have been deceived4 ,and those officers or other members of the corporation who have profited by the deception of and injury to these stockholders1 are the recipients of unjust gains4 ,daniel ,drew inflated the capitalisation of the ,erie ,railroad from seventeen millions to seventy-eight millions within four years for the purpose of manipulating the stock market2 owing to excessive issues of stock1 the ,american ,shipbuilding ,company was thrown into bankruptcy to the great injury of all but one of its stockholders2#ahf because they issued securities to buy subsidiary railway lines at exorbitant prices1 and to provide extravagant commissions and discounts for bankers1 the directors of the ',frisco ,system forced it into a receivership1 after having inflicted a net loss of four million dollars per year upon the stockholders4#ahg ,many other notable performances might be cited where stockwatering1 both in railroads and in industrial concerns1 has defrauded investors of millions of dollars1 and enabled a few powerful directors to reap corresponding enormous profits4 ,at first sight it would seem that stockwatering is of little or no importance to the consumer4 ,since a monopolistic concern endeavours to fix its prices at the point that will yield the maximum net profit in any case1 the amount of stock in existence would seem to be irrelevant to the problem4 ,nevertheless1 the presence of a large quantity of fictitious capital whose owners are calling for dividends1 sometimes constitutes a special force impelling the imposition of higher prices and charges4 ,it will happen at times that overcapitalisation does at least cause a clinging to high prices4 ,the managers of an overcapitalised monopoly may have to face the fact that great blocks of securities are outstanding1 very likely issued by their predecessors1 and now held by all sorts of investors4 ,they are then loath to let go any slice of its profits4 ,we have seen that often the monopoly principle of maximum net profit is not applied in its full sweep1 especially in industries which are potentially subject to public control4 ,where abnormal returns on the original investment have been made1 concessions to public opinion in the way of low rates and better facilities are more likely to come when capitalisation has not been inflated4#ahh ,the ,united ,states ,industrial ,commission found that as regards railroads3 ,in the long run excessive capitalisation tends to keep rates high2 conservative capitalisation tends to make rates low4#ahi ,this indirect influence of stockwatering toward excessive rates and prices becomes effective in two ways4 ,the existence of fictitious capital conceals from the public the high rate of return that is obtained on the true valuation1 thus preventing effective action for a reduction in prices and charges2 and it sometimes causes the rate-making authorities to allow rates to be sufficiently high to yield something to the investors in the inflated capital4 ,if a trust or a railroad has issued stock having a par value of twice the capital invested1 its rate of dividend on the entire capitalisation will be only one-half the rate of interest that it is receiving on the investment4 ,if it pays1 for example1 seven per cent4 on all its stock1 it will be getting fourteen per cent4 on its genuine capital4 ,while the consumers of tobacco1 or the patrons of a railroad1 would raise no outcry against seven per cent4 dividends1 they would probably begin to agitate for an enforcement of the anti-trust laws1 and for a reduction in freight and passenger charges1 if they realised that they were providing for dividends of fourteen per cent4 ,nor is the public adequately protected by government investigations of trusts and regulation of railway rates4 ,despite the anti-trust laws1 many ,american monopolies have for many years received exorbitant profits through excessive prices imposed upon the consumer2 and in many of these instances overcapitalisation and its resulting concealment of real profits have been of considerable assistance to the extortionate monopoly4 ,in fixing railway rates1 the ,interstate ,commerce ,commission1 and the various state railroad commissions1 have been seriously hampered by their inability to determine the real investment of the roads1 and to separate the genuine from the fictitious capitalisation4 ,not until the year #aiac did the national government begin the task of making a valuation of interstate railroad property1 and the work will require several years4 ,very few of the states have made valuations of the railroads within their borders4 ,in the meantime it is certain that many of the rates fixed by both the national and the state bodies will continue1 as in the past1 to be higher than they would have been if the true value of the railroads were known and accepted as the basis of freight and passenger charges4 ,the second bad effect of stockwatering on the consumer is seen when rate-fixing bodies deliberately permit the charges of public service corporations to be high enough to include some returns on that portion of the capitalisation which is fictitious4 ,it is very difficult for such authorities to resist entirely the plea of the innocent investor4 ,consequently1 railroad commissions and other rate making authorities1 and even the courts1 have occasionally made some provision for dividends on the water4 ,chairman ,knapp of the ,interstate ,commerce ,commission admitted a few years ago that1 in considering the reasonableness of a given rate1 this body took into account the financial condition1 and therefore the capitalisation of the railroad4#aij ,in #aiad and #aiae practically all the great railway systems of the ,united ,states made powerful1 and in a measure successful1 appeals to the ,interstate ,commerce ,commission for a rise in rates on the ground that they were unable to pay the normal rate of interest on their securities1 and hence could not obtain on advantageous terms new capital needed for improvements4 ,had the capitalisation of the roads been kept down to the actual investment1 most of them would have been able to pay the competitive rate of interest on all their stock1 and still have a sufficient surplus to command excellent credit4 ,the ,moral ,wrong ,when prices or charges are made high enough to provide returns on fictitious capital1 the consumer is treated unjustly4 ,as we have shown more than once1 the consumer cannot rightfully be required to pay for the products of a monopoly at a greater rate than is necessary to provide the competitive rate of interest on capital in the average conditions of efficiency4 ,if some concerns are able to sell at this price1 and still obtain surplus gains1 they have a right thereto on account of their exceptional productivity4 ,but the capital upon which a monopolistic concern has a claim to the prevailing rate of interest1 is genuine capital3 that is1 the actual investment as interpreted above1 not an inflated capitalisation4 ,the consumers may justly be required to pay for the use and benefit of actual productive goods2 but it is not just that they should be compelled to pay for the supposed use of a capital that has no concrete reality4 ,the stockholders of the monopolistic corporation which imposes upon the consumers exorbitant prices or charges through the instrumentality of inflated capitalisation1 can become guilty of this injustice in two ways3 by promoting the improper capitalisation2 and by getting dividends on stock for which they have not given a fair equivalent4 ,as a rule1 the greater part of such guilt and responsibility rests upon certain special and powerful groups among the stockholders4 ,for example2 the ,j4,p4 ,morgan syndicate which organised the ,united ,states ,steel ,corporation received for that service securities to the value of #fc1ejj1jjj4 ,there can be no question1 says the ,commissioner of ,corporations1 that this huge compensation to the syndicate was greatly in excess of a reasonable payment4#aia ,the syndicate was able to exact this stupendous sum mainly because some of its members were also in control of some of the companies that were brought into the combination4 ,in other words1 as managers of the ,steel ,corporation these various interests virtually determined their compensation as underwriters4#aib ,in the opinion of the minority members of the ,stanley congressional investigating committee1 such a sum bore no relation whatever to the service rendered1 the risk run1 and the capital advanced4#aic ,the majority of the committee characterised the transaction in even stronger language4 ,it is clear1 therefore1 that the syndicate committed injustice toward the consumers both by organising a monopoly which afterward imposed unjust prices1 and by taking millions of dollars in securities which its members did not earn1 and on which they received interest through the exorbitant prices4 ,while this transaction is exceptionally conspicuous1 it is substantially typical of the methods by which many powerful monopolies have watered their stock to the detriment of the public1 and the advantage of a small group of directors and financiers4 ,the ,innocent ,investor ,is the ,state obliged to protect1 or is even justified in protecting1 the innocent victims of stockwatering8 ,that is to say1 should rate-making authorities fix the charges of public service corporations high enough to return some interest to the purchasers of fictitious securities8 ,all the facts and presumptions of the case seem to demand an answer in the negative4 ,in the first place1 it is impossible to distinguish the innocent holders from those who were fully acquainted with the questionable and speculative nature of the stock at the time it came into their possession4 ,in the second place1 the civil law has never formally recognised any such claim on the part of even innocent investors1 nor any such obligation on the part of itself4 ,it has never laid down the principle that any class of investors in fictitious stock has a legal or moral right to obtain the normal rate of interest on such stock through the imposition of sufficiently high charges upon the consumers4 ,nor have the courts1 except in isolated instances1 sanctioned any such principle4 ,on the contrary1 the ,supreme ,court of the ,united ,states1 in the case of ,smyth vs4 ,ames1 declared that a railroad may not impose upon the public the burden of such increased rates as may be required for the purpose of realising profits upon such excessive valuation or fictitious capitalisation4 ,in the third place1 when we consider the matter from the side of morals1 we see that the innocent investors are not the only persons whose rights are involved4 ,if charges are placed high enough to cover interest on fictitious capital1 the cost and the injury fall upon the consumers4 ,the latter have a right to the services of utility corporations1 such as railways and gas companies1 at a fair price2 that is1 a price which will return to the capital put into the concern the prevailing rate of interest1 plus whatever gains are obtained by exceptional efficiency4 ,to require them to pay more than this1 is to compel them to give something for nothing2 namely1 to provide interest on capital which does not exist1 and from which they receive no benefit4 ,when1 therefore1 the ,state intervenes to secure fair charges for the consumers1 it should base them upon the capital actually invested and used in the business of public service4 ,frequently1 however1 the ,state has permitted overcapitalisation1 and charges sufficient to pay normal dividends thereon1 for long periods of years4 ,has it not thereby encouraged investors to cherish the expectation that these high charges would be permitted to continue1 and that the fictitious stock would remain indefinitely as valuable as when it came into their possession8 ,is it not breaking faith with these investors when it reduces charges to the basis of the actual investment8 ,a sufficient answer to these questions is found in the fact that the ,state has never officially sanctioned the practice of stockwatering1 nor in any way intimated that it would recognise the existence of the fictitious stock when it should take up the neglected task of fixing fair rates and charges4 ,at the most1 the civil law has merely tolerated the practice1 and the resulting extortion upon the public4 ,and there has never been a time when the greater and saner part of public opinion did not look upon overcapitalisation as at the least abnormal and irregular4 ,neither from the civil law nor from public sentiment have the devices of inflating capitalisation received that measure of approval which would confer upon investments therein the legal or the moral status of vested rights4 ,to the innocent investor in watered stocks the maxim1 caveat emptor1 is as fairly applicable as to the man who has been deceived into lending his money on insufficient security1 or the man who has been induced by the asseverations of a highly imaginative prospectus to put his money into a salted gold mine1 or the man who buys stolen goods from a pawn shop1 or the man who because of insufficient police protection loses his purse to a highwayman4 ,in all these cases perfect legal safeguards would have prevented the loss2 yet in none of them does the ,state undertake to make the loss good to the innocent victim4 ,such seems to be the strict justice of the situation as between the consumer and the innocent investor4 ,it may sometimes happen that a particularly grave hardship can be averted from the latter at a comparatively slight cost to the former4 ,in such a case equity would seem to require that some concession be made to the investors through the imposition of somewhat higher charges upon the consumer4 ,magnitude of ,overcapitalisation ,probably the majority of the great steam railroads1 street railways1 and gas companies that were organised during the last quarter of the nineteenth century inflated their capitalisation to a greater or less extent4 ,since the year #aijj the trusts have been the chief exponents and illustrations of the practice4 ,according to ,president ,van ,hise1 the majority of the great concentrations of industry have gone through two or three stages of reorganisation1 the promoters and financiers each time profiting greatly1 sometimes enormously4#aid ,for example2 in #aijh the water in the ,american ,tobacco ,company was estimated by the ,commissioner of ,corporations at #ff1jjj1jjj2 the ,united ,states ,shipbuilding ,company diluted its twelve and one-half million dollars of capital with more than fifty-five millions of water2 the ,united ,states ,steel ,corporation contained at the time of its organisation fictitious capital to the amount of #ejj1jjj1jjj2 and at least fifty per cent4 of the common stock of the ,american ,sugar ,refining ,company represented no actual investment4#aie ,owing to the penetrating and widespread criticism1 and the government investigations and prosecutions of the last few years1 the practice of stockwatering has very greatly diminished4 ,perhaps the most flagrant recent example is that of the ,pullman ,company1 which according to the testimony of ,r4 ,t4 ,lincoln before the ,federal ,commission on ,industrial ,relations1 distributed among its stockholders #ajj1jjj1jjj in stock dividends between #ahih and #aiaj4 ,nevertheless the temptation to inflate capital will exist until the device is stringently prohibited by law4 ,both the nation and the states ought to adopt the policy of forbidding the sale of stock at less than par value1 and restricting issues of stock to the amount required for the establishment1 equipment1 and permanent betterment of a concern1 including a sum to cover the loss of interest to the investors during the early period of the business4 ,any extraordinary risks to which an enterprise is liable can be protected by the simple device of allowing a correspondingly high rate of interest on the securities4 ,with such legislation enacted and enforced1 neither the investor nor the consumer could be deceived or defrauded2 and the financing and management of corporations would become less speculative1 and more beneficial to the community4 ,the present chapter may be fittingly closed with a moderate and significant statement from the pen of ,professor ,taussig3 ,it is doubtful whether the whole mechanism of irregular and swollen capitalisation was at any time necessary or wise4 ,why not provide once for all that securities shall be issued only to represent what has been invested8444 ,it is sometimes said that freedom1 even recklessness1 in the issue of securities was a useful device1 in that it enabled the projectors to look forward to returns really tempting1 and at the same time concealed these returns from a grudging public4444 ,a more simple and straightforward way of dealing with the issue of securities might thus have dampened in some degree the feverish speculation and restless progress of railway development4 ,but a slower pace would have had its advantages also1 and1 not least1 restriction of securities would have saved great complications in the later stages of established monopoly and needed regulation4#aif ,,footnotes3 #ahf ,cf4 ,ripley1 ,trusts1 ,pools1 and ,corporations1 pp4 #bjg-baj4 #ahg ,see ,report of the ,interstate ,commerce ,commission on these transactions4 #ahh ,taussig1 ,principles of ,economics1 ,,ii1 #che1 #chf4 #ahi ,final ,report1 p4 #dad4 #aij ,final ,report of the ,industrial ,commission1 p4 #dac4 #aia ,report on the ,steel ,industry1 p4 #ch4 #aib ,idem1 p4 #ci4 #aic ,chicago ,record-,herald1 ,july #bi1 #aiab4 #aid ,op4 cit41 p4 #bh4 #aie ,cf4 ,van ,hise1 op4 cit41 pp4 #bi1 #adb1 #adi4 #aif ,op4 cit41 ,,ii1 #chg1 #chh4 ,,chapter ,,xx ,,the ,,legal ,,limitation ,,of ,,fortunes ,if the taxation and other measures of reform suggested in ,section ,i were fully applied to our land system2 if co-operative enterprise were extended to its utmost practicable limits for the correction of capitalism2 and if the wide extension of educational opportunities1 and the elimination of the surplus gains of monopolies restricted the profits of the business man to an amount strictly commensurate with his ability and risks1--if all these results were accomplished the number of men who could become millionaires through their own efforts would be so small that their success would arouse popular applause rather than popular envy4 ,their claim to whatever wealth they might accumulate would be generally looked upon as entirely valid and reasonable4 ,their pecuniary eminence would be pronounced quite as deserved as the literary eminence of a ,lowell1 the scientific eminence of a ,pasteur1 or the political eminence of a ,lincoln4 ,in such conditions there could be no disconcerting discussion of the menace of great fortunes4 ,in the meantime1 these reforms are not realised1 nor are they likely to be even approximately established within the present generation4 ,for some time to come it will be possible for the exceptionally able1 the exceptionally cunning1 and the exceptionally lucky to accumulate great riches through clever and fortuitous utilisation of special advantages1 natural and otherwise4 ,moreover1 a great proportion of the large fortunes already in existence will persist1 and will be transmitted to heirs who will in many cases cause them to increase4 ,can nothing be done to reduce the size and lessen the number of these great accumulations8 ,if so1 is such a proceeding socially and morally desirable8 ,the ,method of ,direct ,limitation ,the law might directly limit the amount of property to be held by any individual4 ,if the limit were placed fairly high1 say1 at one hundred thousand dollars1 it could scarcely be regarded as an infringement on the right of property4 ,in the case of a family numbering ten members1 this would mean one million dollars4 ,all the essential objects of private ownership could be abundantly met out of a sum of one hundred thousand dollars for each person4 ,moreover1 a restriction of this sort need not prevent a man from bestowing unlimited amounts upon charitable1 religious1 educational1 or other benevolent causes4 ,it would1 indeed1 hinder some persons from satisfying certain unessential wants1 such as1 the desire to enjoy gross or refined luxuries1 great financial power1 and the control of immense industrial enterprises2 but none of these objects is necessary for any individual's genuine welfare4 ,in the interest of the social good such private and unimportant ends may properly be rendered impossible of realisation4 ,such a restriction would no more constitute a direct attack upon private ownership than limitations upon the use and kinds of property4 ,at present a man may not do what he pleases with his gun1 his horse1 or his automobile1 nor may he invest his money in the business of carrying the mails4 ,the limitation of fortunes is just what the word expresses1 a limitation of the right of property4 ,it is not a denial nor destruction of that right4 ,as a limitation of the amount to be held by an individual1 it does not differ in principle from a limitation of the kinds of goods that may become the subject of private ownership4 ,there is nothing in the nature of things nor in the reason of property to indicate that the right of ownership is unlimited in quantity any more than it is in quality4 ,the final end and justification of individual rights of property is human welfare2 that is1 the welfare of all individuals severally and collectively4 ,now it is quite within the bounds of physical possibility that the limitation under discussion might be conducive to the welfare of human beings both as individuals and as constituting society4 ,nevertheless the dangers and obstacles confronting any legal restriction of fortunes are so real as to render the proposal socially inexpedient4 ,it would easily lend itself to grave abuse4 ,once the community had habituated itself to a direct limitation of any sort1 the temptation to lower it in the interest of better distribution and simpler living would become exceedingly powerful4 ,eventually the right of property might take such an attenuated and uncertain form in the public mind as to discourage labour and initiative1 and thus seriously to endanger human welfare4 ,in the second place1 the manifold evasions to which the measure would lend itself would make it of very doubtful efficacy4 ,to be sure1 neither of these objections is absolutely conclusive1 but taken together they are sufficiently weighty to dictate that such a proposal should not be entertained so long as other and less dangerous methods are available to meet the problem of excessive fortunes4 ,four of the nine members of the ,federal ,commission on ,industrial ,relations have suggested that the amount of property capable of being received by the heirs of any person be limited to one million dollars4#aig ,if we assume that by heirs the ,commission meant the natural persons to whom property might come by bequest or succession1 this limitation would permit a family of ten persons to inherit one hundred thousand dollars each1 and a family of five persons to obtain two hundred thousand dollars apiece4 ,would such a restriction be a violation of the right of private ownership8 ,the answer depends upon the effects of the measure on human welfare4 ,the rights of bequest and succession are integral elements of the right of ownership2 hence they are based upon human needs1 and designed for the promotion of human life and development4 ,a person needs private property not only to provide for his personal wants and those of his family during his lifetime1 but also to safeguard the welfare of his dependents and to assist other worthy purposes1 after he has passed away4 ,owing to the uncertainty of death1 the latter objects cannot be adequately realised without the institutions of bequest and succession4 ,all the necessary and rational ends of bequest and succession could be attained in a society in which no man's heirs could inherit more than one million dollars4 ,under such an arrangement very few of the children of millionaires would be prevented from getting at least one hundred thousand dollars4 ,that much would be amply sufficient for the essential and reasonable needs of any human being4 ,indeed1 we may go further1 and lay down the proposition that the overwhelming majority of persons can lead a more virtuous and reasonable life on the basis of a fortune of one hundred thousand dollars than when burdened with any larger amount4 ,the persons who have the desire and the ability to use a greater sum than this in a rational way are so few that a limitation law need not take them into account4 ,corporate persons1 such as hospitals1 churches1 schools1 and other helpful institutions1 should not1 as a rule1 be restricted as to the amount that they might inherit2 for many of them could make a good use of more than the amount that suffices for a natural person4 ,so much for the welfare and rights of the beneficiaries of inheritance4 ,the owners of estates would not be injured in their rights of property by the limitation that we are here considering4 ,in the first place1 the number of persons practically affected by the limitation would be extremely small4 ,only an insignificant fraction of property owners ever transmit or expect to be wealthy enough to transmit to their families more than one million dollars4 ,of these few a considerable proportion would not be deterred by the million dollar limitation from putting forth their best and greatest efforts in a productive way4 ,they would continue to work either from force of habit and love of their accustomed tasks1 or from a desire to make large gifts to their heirs during life1 or because they wished to assist some benevolent enterprise4 ,the infinitesimally small number whose energies would be diminished by the limitation could very safely be treated as a socially negligible element4 ,the community would be better off without them4 ,the limitation of inheritance would1 indeed1 be liable to abuse4 ,circumstances would undoubtedly arise in which the community would be strongly tempted to make the maximum inheritable amount so low as to discourage the desire of acquisition1 and to deprive heirs of reasonable protection4 ,while the bad effects of such a limitation would not be as great as those following a similar abuse with regard to possessions1 they are sufficiently grave and sufficiently probable to suggest that the legal restriction of bequest and succession should not be considered except as a last resort1 and when the transmission of great fortunes had become a great and certain public evil4 ,it seems reasonable to conclude1 then1 that neither the limitation of possessions nor the limitation of inheritance is necessarily a direct violation of the right of property1 but that the possible and even probable evil consequences of both are so grave as to make these measures of very doubtful benefit4 ,whether the dangers in question are sufficiently great to render the adoption of either proposal morally wrong1 is a question that cannot be answered with any degree of confidence4 ,what seems to be fairly certain is that in our present conditions legislation of this sort would be an unnecessary and unwise experiment4 ,limitation ,through ,progressive ,taxation ,is it legitimate and feasible to reduce great fortunes indirectly1 through taxation8 ,there is certainly no objection to the method on moral or social principles4 ,as we have seen in chapter viii1 taxes are not levied exclusively for the purpose of raising revenue4 ,some kinds of them are designed to promote social rather than fiscal ends4 ,now1 to prevent and diminish dangerous accumulations of wealth is a social end which is at least as important as most of the objects sought in license taxes4 ,the propriety of attempting to attain this end by taxation is1 therefore1 to be determined entirely by reference to its probable effectiveness4 ,the precise method of taxation available here is a progressive tax on incomes and inheritances4 ,by a progressive tax is meant one whose rate advances in some definite proportion to the increases in the amount taxed4 ,for example1 a bequest of #ajj1jjj dollars might pay one per cent42 #bjj1jjj dollars1 two per cent42 #cjj1jjj dollars1 three per cent41 and so forth4 ,the reasonableness of the principle of progression in taxation has been well stated by ,professor ,seligman3 ,all individual wants vary in intensity1 from the absolutely necessary wants of mere subsistence to the less pressing wants which can be satisfied by pure luxuries4 ,taxes1 in so far as they rob us of the means of satisfying our wants1 impose a sacrifice upon us4 ,but the sacrifice involved in giving up a portion of what enables us to satisfy our necessary wants is very different from the sacrifice involved in giving up what is necessary to satisfy our less urgent wants4 ,if two men have incomes of one thousand dollars and one hundred thousand dollars respectively1 we impose upon them not equal but very unequal sacrifices if we take away from each the same proportion1 say ten per cent4 ,for the one thousand dollar individual now has only nine hundred dollars1 and must deprive himself and his family of necessaries of life2 the one hundred thousand dollar individual has ninety thousand dollars1 and if he retrenches at all1 which is very doubtful1 he will give up only great luxuries1 which do not satisfy any pressing wants4 ,the sacrifice imposed on the two individuals is not equal4 ,we are laying on the one thousand dollar man a far heavier sacrifice than on the one hundred thousand dollar man4 ,in order to impose equal sacrifices we must tax the richer man not only absolutely1 but relatively1 more than the poor man4 ,the taxes must be not proportional1 but progressive2 the rate must be lower in the one case than in the other4#aih ,the principle of equality of sacrifices which underlies the progressive theory does not justify the levelling and communistic inferences that have sometimes been brought against it4 ,equality of sacrifice does not mean equality of satisfied1 or unsatisfied1 wants after the tax has been collected4 ,if ,brown pays a tax of one per cent4 on his income of two thousand dollars1 it does not follow that ,jones with an income of ten thousand dollars should pay a sufficiently high rate to leave him with only the net amount remaining to ,brown2 namely1 #aihj dollars4 ,equality of sacrifice means proportional equality of burden1 not equality of net resources after the tax has been deducted4 ,the object of the progressive rate is to make relatively equal the sacrifices caused by the tax itself1 not to equalise the sum total of burdens or unsatisfied wants that exist among men4 ,another objection to progressive taxation is that it readily lends itself to confiscation of the largest incomes4 ,all that is necessary to produce this result is to increase the rate with sufficient rapidity4 ,this could be accomplished either by large steps in the rate itself or by small steps in the income increases which formed the basis of the advances in the rate4 ,for example1 if the ,federal income tax1 which at present levies two per cent4 on incomes of more than three thousand dollars1 and three per cent4 on incomes of over twenty thousand dollars1 should thereafter progress geometrically with every geometrically progressive increment of income1 the rate on incomes above #fdj1jjj would be #if per cent46 ,or if the rate should progress arithmetically with every ten thousand dollars of increase above twenty thousand dollars1 it would be #ajj per cent4 on incomes of over #iij1jjj6 ,to this objection there are two valid answers4 ,even if the rate should ultimately reach one hundred per cent4 it need not1 and on progressive principles it should not1 effect confiscation of an entire income4 ,the progressive theory is satisfied when the successive rates of the tax apply to successive increments of income1 instead of to the entire income4 ,for example1 the rate might begin at one per cent4 on incomes of one thousand dollars1 and increase by one per cent4 with every additional thousand1 and yet leave a very large part of the income in the hands of the receiver4 ,each one thousand dollars would be taxed at a different rate1 the first at one per cent41 the fiftieth at fifty per cent41 and the last at one hundred per cent4 ,if the hundred per cent4 rate were applied to the whole of the higher incomes1 it would be a direct violation of the principle of equality of sacrifice4 ,in the second place1 the progressive theory forbids rather than requires the rate to go as high as one hundred per cent4 ,while the sacrifices imposed by a given rate are greater in the case of small than of large properties1 they become approximately equal as between all properties above a certain high level4 ,after this level is reached1 additional increments of wealth will all be expended either for extreme luxuries1 or converted into new investments4 ,consequently they will supply wants of approximately equal intensity4 ,for example1 the wants dependent upon a surplus of #be1jjj dollars in excess of an income of #ajj1jjj dollars1 and the wants dependent upon a surplus of #ge1jjj dollars above the same level do not differ materially in strength4 ,to diminish these surpluses by the same per cent41 say1 ten1 would impose proportionally equal burdens4 ,hence the rate of progression should be degressive2 that is1 it should increase at a constant pace until a certain high level of income is reached1 then increase at a steadily diminishing pace1 and finally become uniform on the very highest incomes4 ,for example2 if the rate increased one per cent4 with every additional five thousand dollars1 reaching fifteen per cent4 on incomes of seventy-five thousand dollars1 it should be on eighty thousand dollars1 not sixteen but fifteen and one-half per cent4 ,on #he1jjj dollars the rate should be #ae-c_/d per cent42 on #ij1jjj1 #ae-g_/h per cent42 on #ie1jjj1 #ae-ae_/af per cent42 and on all sums of #ajj1jjj and over1 #af per cent4 ,the point at which the increments in the rate began to decline would be that at which differences in wants began to diminish1 and the point at which the rate became stationary would be that at which wants fell to the same level of intensity4 ,the ,proper ,rate of ,income and ,inheritance ,taxes ,while the principle of equality of sacrifices forbids a rate of tax that would reach or approximate confiscation1 it gives no definite indication of the proper scale of progression1 or of the maximum limit that justice would set to the rate4 ,under our ,federal law the highest rate on incomes is now #ac per cent42 under the ,wisconsin law it is #f per cent42 under the law of ,prussia it is #d per cent42 and under the ,british act of #aiji it is about #h-a_/b per cent4 ,evidently a much higher rate than any of these would be required to make any impression upon swollen fortunes4 ,the ,british government recently 7,september1 #aiae7 made the maximum rate about #cc-a_/c per cent4 ,to be sure1 this is a war measure which probably will not continue after the restoration of peace4 ,however1 if it were made permanent it could not be proved to be unjust1 provided that it were applied to the increments of income above a certain high limit1 but not to these incomes in their entirety4 ,our present inheritance taxes are very low1 averaging less than #c per cent4 throughout the ,united ,states4 ,probably the highest rate is to be found in ,wisconsin1 where bequests to non relatives in excess of half a million dollars are subject to a tax of fifteen per cent4 ,it is clear that all the existing rates could be raised very considerably without causing a violation of justice4 ,some years ago ,andrew ,carnegie recommended a tax of fifty per cent4 on estates amounting to more than one million dollars4#aii ,no country has yet reached this high level of inheritance taxes4 ,nevertheless we cannot certainly stigmatise it as unjust either to the testator or his heirs1 nor can we prove that it is in any other manner injurious to human welfare4 ,all that can be said with confidence concerning the just rates of inheritance taxation must take the form of generalisations4 ,the increments of the tax should correspond as closely as possible to the diminishing intensity of the wants which the tax deprives of satisfaction2 in the case of each heir a certain fairly high minimum of property should be entirely exempt2 on all the highest estates the rate should be uniform1 and it should fall a long way short of confiscation2 and the tax should at no point be such as to discourage socially useful activity and enterprise4 ,effectiveness of ,such ,taxation ,the essential justice of the measures is not the only consideration affecting high income and inheritance taxes4 ,there remain the questions of expediency and feasibility4 ,under the first head the objection is sometimes raised that taxes which appropriated a considerable portion of the larger incomes and inheritances would diminish very materially the social supply of capital4 ,immense sums of money would go into the public treasury which otherwise would have been invested in commerce and industry4 ,two questions are raised by this situation3 first1 whether it might not be better for society to have these sums devoted1 through public works of various kinds1 to consumptive uses instead of to an increase in the supply of capital2 second1 whether the reduction in the savings and capital provided by the persons paying the taxes could be offset by increases in saving among other classes4 ,even if it be assumed that the first question should receive a negative answer1 it is not improbable that the second should be answered in the affirmative4 ,in other words1 the increased saving which the poorer and middle classes would be enabled to make as a result of the shifting of some of their burden of taxation to the large incomes and inheritances1 might very well counterbalance the curtailment in the investments of the wealthy classes4 ,even if this possibility were not fully realised1 even if the net volume of capital in the community were somewhat diminished1 this disadvantage might be more than neutralised by the wider social benefits of the taxation policy4 ,with regard to the feasibility of very heavy income and inheritance taxes1 it is sometimes contended that neither of these measures can be made effective toward the reduction of abnormal fortunes4#bjj ,it is held that the successful collection of these taxes requires the co-operation of the persons affected by them2 that if the rate should go above ten or twelve per cent41 the income receiver would evade the tax in a great variety of ways1 while the owner of a large estate would transfer his property outright to a trust company1 which would after his death make the desired distribution4 ,the man who urges these objections is a very high authority on taxation1 especially on its administrative side2 nevertheless his contentions are not absolutely conclusive4 ,in particular1 it does not seem probable that high inheritance taxes could be evaded by the simple devices that he mentions4 ,it ought not to be beyond the power of administrative ingenuity to find methods of defeating such subterfuges4 ,however1 it is altogether likely that the possibilities of evasion would be sufficient to prevent the imposition of tax rates that approached within measurable distance of the borderland of confiscation4 ,the sum of the matter seems to be that the reduction and prevention of great fortunes cannot prudently be accomplished by the method of direct limitation2 that these ends may wisely and justly be attained indirectly1 through the imposition of progressive income and inheritance taxes2 but that the extent to which these measures would be genuinely effective cannot be estimated until they have been given a thorough trial4 ,,footnotes3 #aig ,final ,report1 p4 #cb4 #aih ,progressive ,taxation1 pp4 #baj1 #baa2 cf4 ,vermeersch1 ,quaestiones de ,justitia1 pp4 #id-abf4 #aii ,the ,gospel of ,wealth1 pp4 #aa1 #ab4 #bjj ,cf4 ,dr4 ,t4 ,s4 ,adams in ,papers and ,proceedings of the #bgth ,annual ,meeting of the ,american ,economic ,association1 pp4 #bcd1 sq4 ,,chapter ,,xxi ,,the ,,duty ,,of ,,distributing ,,superfluous ,,wealth ,the correctives of the present distribution that were proposed before the beginning of the last chapter related mainly to the apportionment of the product among the agents of production4 ,they would affect that distribution which takes place as an integral element of the productive process1 not any disposition which the productive agents might desire or be required to make of the shares that they had acquired from the productive process4 ,such were many of the proposals regarding land tenure1 and all of those concerning co-operative enterprises and monopoly4 ,in the last chapter we considered the possibility of neutralising to some extent the abuses of the primary distribution by the action of government through the taxation of large fortunes4 ,these were proposals directly affecting the secondary distribution4 ,and they involved the method of compulsion4 ,in the present chapter we shall inquire whether desirable changes in the secondary distribution may not be effected by voluntary action4 ,the specific questions confronting us here are1 whether and how far proprietors are morally bound to distribute their superfluous wealth among their less fortunate fellows4 ,the ,question of ,distributing ,some ,the authority of revealed religion returns to the first of these questions a clear and emphatic answer in the affirmative4 ,the ,old and the ,new ,testaments abound in declarations that possessors are under very strict obligation to give of their surplus to the indigent4 ,perhaps the most striking expression of this teaching is that found in the ,gospel according to ,st4 ,matthew1 ch4 #be1 verses #cb-df1 where eternal happiness is awarded to those who have fed the hungry1 given drink to the thirsty1 received the stranger1 covered the naked1 visited the sick1 and called upon the imprisoned2 and eternal damnation is meted out to those who have failed in these respects4 ,the principle that ownership is stewardship1 that the man who possesses superfluous goods must regard himself as a trustee for the needy1 is fundamental and all-pervasive in the teaching of ,christianity4 ,no more clear or concise statement of it has ever been given than that of ,st4 ,thomas ,aquinas3 ,as regards the power of acquiring and dispensing material goods1 man may lawfully possess them as his own2 as regards their use1 however1 a man ought not to look upon them as his own1 but as common1 so that he may readily minister to the needs of others4#bja ,reason likewise enjoins the benevolent distribution of surplus wealth4 ,it reminds the proprietor that his needy neighbours have the same nature1 the same faculties1 capacities1 wants1 and destiny as himself4 ,they are his equals and his brothers4 ,reason1 therefore1 requires that he should esteem them as such1 love them as such1 and treat them as such2 that he should love them not merely by well wishing1 but by well doing4 ,since the goods of the earth were intended by the ,creator for the common benefit of all mankind1 the possessor of a surplus is reasonably required to use it in such a way that this original purpose of all created goods will be fulfilled4 ,to refuse is to treat one's less fortunate neighbour as something different from and less than oneself1 as a creature whose claim upon the common bounty of nature is something less than one's own4 ,multiplying words will not make these truths plainer4 ,the man who does not admit that the welfare of his neighbour is of equal moral worth and importance with his own welfare1 will logically refuse to admit that he is under any obligation of distributing his superfluous goods4 ,the man who does acknowledge this essential equality will be unable to find any logical basis for such refusal4 ,is this obligation one of charity or one of justice8 ,at the outset a distinction must be made between wealth that has been honestly acquired and wealth that has come into one's possession through some violation of rights4 ,the latter kind must1 of course1 be restored to those persons who have been wronged4 ,if they cannot be found or identified the ill-gotten gains must be turned over to charitable or other worthy objects4 ,since the goods do not belong to the present holder by any valid moral title1 they should be given to those persons who are qualified by at least the claim and title of needs4 ,some of the ,fathers of the ,church maintained that all superfluous wealth1 whether well or ill gotten1 ought to be distributed to those in want4 ,st4 ,basil of ,csarea3 ,will not the man who robs another of his clothing be called a thief8 ,is the man who is able and refuses to clothe the naked deserving of any other appellation8 ,the bread that you withhold belongs to the hungry2 the cloak that you retain in your chest belongs to the naked2 the shoes that are decaying in your possession belong to the shoeless2 the gold that you have hidden in the ground belongs to the indigent4 ,wherefore1 as often as you were able to help men and refused1 so often you did them wrong4#bjb ,st4 ,augustine of ,hippo3 ,the superfluities of the rich are the necessities of the poor4 ,they who possess superfluities possess the goods of others4#bjc ,st4 ,ambrose of ,milan3 ,the earth belongs to all2 not to the rich2 but those who possess their shares are fewer than those who do not4 ,therefore1 you are paying a debt1 not bestowing a gift4#bjd ,pope ,gregory the ,great3 ,when we give necessaries to the needy1 we do not bestow upon them our goods2 we return to them their own2 we pay a debt of justice rather than of mercy4#bje ,the great systematiser of theology in the thirteenth century1 ,st4 ,thomas ,aquinas1 who is universally recognised as the most authoritative private teacher in the ,church1 stated the obligation of distribution in less extreme and more scientific terms3 ,according to the order of nature instituted by ,divine ,providence1 the goods of the earth are designed to supply the needs of men4 ,the division of goods and their appropriation through human law do not thwart this purpose4 ,therefore1 the goods which a man has in superfluity are due by the natural law to the sustenance of the poor4#bjf ,that this is the official teaching of the ,church to-day is evident from the words of ,pope ,leo ,,xiii3 ,when one has provided sufficiently for one's necessities and the demands of one's state of life1 there is a duty to give to the indigent out of what remains4 ,it is a duty not of strict justice1 save in case of extreme necessity1 but of ,christian charity4#bjg ,nearly thirteen years earlier1 the same ,pope had written3 ,the ,church lays the rich under strict command to give their superfluity to the poor4#bjh ,the only difference between the ,fathers and ,pope ,leo ,,xiii and ,st4 ,thomas on this question has reference to the precise nature of the obligation4 ,according to the ,fathers1 the duty of distribution would seem to be a duty of justice4 ,in the passage quoted above from ,st4 ,thomas1 superfluities are said to belong1 or to be due 7debetur7 to the needy2 but the particular moral precept that applies is not specified4 ,in another place1 however1 the ,angelic ,doctor declares that almsgiving is an act of charity4#bji ,pope ,leo ,,xiii explicitly says that the obligation of giving is one of charity1 except in extreme cases4 ,the latter phrase refers to the traditional doctrine that a person who is in extreme need2 that is1 in immediate danger of losing life1 limb1 or some equivalent personal good1 is justified in the absence of any other means of succour in taking from his neighbour what is absolutely necessary4 ,such appropriation1 says ,st4 ,thomas1 is not properly speaking theft2 for the goods seized belong to the needy person1 inasmuch as he must sustain life4#baj ,in a word1 the medival and the modern ,catholic teaching would make distribution of superfluous goods a duty of justice only in extreme situations1 while the ,fathers laid down no such specific limitation4 ,nevertheless1 the difference is less important than it appears to be on the surface4 ,when the ,fathers lived1 theology had not been systematised nor given a precise terminology2 consequently1 they did not always make exact distinctions between the different classes of virtues and obligations4 ,in the second place1 the ,patristic passages that we have quoted1 and others of like import1 were mostly contained in sermons addressed to the rich1 and consequently were expressed in hortatory rather than scientific terms4 ,moreover1 the needs of the time which the rich were exhorted to relieve were probably so urgent that they could correctly be classed as extreme1 and therefore would give rise to an obligation of justice on the part of those who possessed superfluous wealth4 ,the truly important fact of the whole situation is that both the ,fathers and the later authorities of the ,church regard the task of distributing superfluous goods as one of strict moral obligation1 which in serious cases is binding under pain of grievous sin4 ,whether it falls under the head of justice or under that of charity1 is of no great practical consequence4 ,the ,question of ,distributing ,all ,is a man obliged to distribute all his superfluous wealth8 ,as regards the support of human life1 ,catholic moral theologians distinguish three classes of goods3 first1 the necessaries of life1 those utilities which are essential to a healthy and humane existence for a man and his family1 regardless of the social position that he may occupy1 or the standard of life to which he may have been accustomed2 second1 the conventional necessities and comforts1 which correspond to the social plane upon which the individual or family moves2 third1 those goods which are not required to support either existence or social position4 ,goods of the second class are said to be necessary as regards conventional purposes1 but superfluous as regards the maintenance of life1 while those of the third class are superfluous without qualification4 ,no obligation exists to distribute the first class of goods2 for the possessor is justified in preferring his own primary and fundamental needs to the equal or less important needs of his neighbours4 ,the owner of goods of the second class is under obligation to dispense them to persons who are in extreme need1 since the preservation of the neighbour's life is more important morally than the maintenance of the owner's conventional standard of living4 ,on the other hand1 there is no obligation of giving any of these goods to meet those needs of the neighbour which are social or conventional4 ,here1 again1 it is reasonable that the possessor should prefer his own interests to the equal interests of his fellows4 ,still less is he obliged to expend any of the second class of goods for the relief of ordinary or common distress4 ,as regards the third class of goods1 those which are absolutely superfluous1 the proportion to be distributed is indefinite1 depending upon the volume of need4 ,the doctrine of the moral theologians on the subject is summed up in the following paragraph4 ,when the needs to be supplied are ordinary1 or common2 that is1 when they merely expose a person to considerable and constant inconvenience1 without inflicting serious physical1 mental1 or moral injury1 they do not impose upon any man the obligation of giving up all his superfluous goods4 ,according to some moral theologians1 the possessor fulfils his duty in such cases if he contributes that proportion of his surplus which would suffice for the removal of all such distress1 provided that all other possessors were equally generous2 according to others1 if he gives two per cent4 of his superfluity2 according to others1 if he contributes two per cent4 of his annual income4 ,these estimates are intended not so much to define the exact measure of obligation as to emphasise the fact that there exists some degree of obligation2 for all the moral theologians agree that some portion of a man's superfluous goods ought to be given for the relief of ordinary or common needs4 ,when1 however1 the distress is grave2 that is1 when it is seriously detrimental to welfare2 for example1 when a man or a family is in danger of falling to a lower social plane2 when health1 morality1 or the intellectual or religious life is menaced1--possessors are required to contribute as much of their superfluous goods as is necessary to meet all such cases of distress4 ,if all is needed all must be given4 ,in other words1 the entire mass of superfluous wealth is morally subject to the call of grave need4 ,this seems to be the unanimous teaching of the moral theologians4#baa ,it is also in harmony with the general principle of the moral law that the goods of the earth should be enjoyed by the inhabitants of the earth in proportion to their essential needs4 ,in any rational distribution of a common heritage1 the claims of health1 mind1 and morals are surely superior to the demands of luxurious living1 or investment1 or mere accumulation4 ,what per cent4 of the superfluous incomes in the ,united ,states would suffice to alleviate all the existing grave and ordinary distress8 ,nothing like an exact answer is possible1 but we can get an approximation that will have considerable practical value4 ,from the estimates of family incomes given by ,professor ,w4 ,i4 ,king1 it appears that in #aiaj the number of families with annual incomes of less than one thousand dollars was a little more than ten and three quarter millions1 and that the total incomes of those families receiving more than ten thousand dollars a year amounted to a little more than three and three quarter billions4#bab ,if each of the latter class of families should expend ten thousand dollars per year for the needs of life and social position1 they would have left nearly two and three quarter billions for distribution among the ten and three quarter million families who are below the one thousand dollar level4 ,so far as the figures of ,professor ,king's table enable us to judge1 the greater part if not all of this sum would be required to bring this group of families up to that standard4 ,possibly an income of one thousand dollars per family is not required to remove all ordinary and grave distress2 and possibly ten thousand dollars is not enough for the reasonable requirements of some families4 ,if both these suppositions are true they will tend to cancel each other3 the needs to be met will be less1 but the superfluous income to be distributed will be less also4 ,whatever be the minimum and maximum limits of family income that approve themselves to competent students1 the conclusion will probably be inevitable that the greater part of the superfluous income of the well-to-do and the rich would be required to abolish all grave and ordinary need4 ,some ,objections ,the desirability of such a thoroughgoing distribution of superfluous incomes appears to be refuted by the fact that a considerable part of the capital and organising ability that function in industry is dependent upon the possession of superfluous goods by the richer classes4 ,that surplus of the larger incomes which is not consumed or given away by its receivers at present1 constitutes no small portion of the whole supply of savings annually converted into capital4 ,were all of it to be withdrawn from industry and distributed among the needy1 the process might involve more harm than good4 ,moreover1 the very large industrial enterprises are initiated and carried on by men who have themselves provided a considerable share of the necessary funds4 ,without these large masses of personal capital1 they would have much more difficulty in organising these great enterprises1 and would be unable to exercise their present dominating control4 ,to the first part of this objection we may reply that the distribution of superfluous goods need not involve any considerable withdrawal of existing capital from industry4 ,the giving of large amounts to institutions and organisations1 as distinguished from needy individuals1 might mean merely a transfer of capital from one holder to another2 for example1 the stocks and bonds of corporations4 ,the capital would be left intact1 the only change being in the persons that would thenceforth receive the interest4 ,small donations could come out of the possessor's income4 ,moreover1 there is no reason why the whole of the distribution could not be made out of income rather than out of capital4 ,while the givers would still remain possessed of superfluous wealth1 they would have handed over to needy objects1 persons1 and causes the thing that in modern times constitutes the soul and essence of wealth2 namely1 its annual revenues4 ,nevertheless1 the distribution from income would apparently check the necessary increase of capital1 lessen unduly the supply of capital for the future4 ,were all1 or the greater part of superfluous incomes devoted to benevolent objects it would be used up for consumption goods2 such as1 food1 clothing1 housing1 hospitals1 churches1 schools4 ,would not this check to the increase of capital cause serious injury to society8 ,new investment would not be diminished by an amount equal to the whole amount of income transferred to objects of benevolence4 ,for the improved position of the poorer classes that had shared in the distribution would enable them to increase their productive power and their resources1 and therefore to save money and convert it into capital4 ,again1 their increased consuming power would augment the demand for goods1 bring about a larger use of existing capital instruments1 and therefore lead to an enlargement of the community's capacity for saving4 ,thus1 the new saving and capital would1 partially at least1 take the place of that which was formerly provided by the possessors of surplus income4 ,in so far as a net diminution occurred in the community's supply of capital1 it would probably be more than offset1 from the viewpoint of social welfare1 by the better diffusion of goods and opportunities among the masses of the population4 ,the second difficulty noted above1 that such a thorough distribution of superfluous goods would lessen considerably the power of the captains of industry to organise and operate great enterprises1 can be disposed of very briefly4 ,those who made the distribution from income rather than from invested wealth1 would still retain control of large masses of capital4 ,all1 however1 would have deprived themselves of the power to enlarge their business ventures by turning great quantities of their own income back into industry4 ,but if their ability and character were such as to command the confidence of investors1 they would be able to find sufficient capital elsewhere to equip and carry on any sound and necessary enterprise4 ,in this case the process of accumulating the required funds would1 indeed1 be slower than when they used their own1 but that would not be an unmixed disadvantage4 ,when the business was finally established1 it would probably be more stable1 would respond to a more definite and considerable need1 and would be more beneficial socially1 inasmuch as it would include a larger proportion of the population among its proprietors4 ,and the diminished authority and control exercised by the great capitalist1 on account of his diminished ownership of the stock1 would in the long run be a good thing for society4 ,it would mean the curtailment of a species of power that is easily liable to abuse1 wider opportunities of industrial leadership1 and a more democratic and stable industrial system4 ,only a comparatively small portion of the superfluous goods of the country could with advantage be immediately and directly distributed among needy individuals4 ,the greater part would do more good if it were given to religious and benevolent institutions and enterprises4 ,churches1 schools1 scholarships1 hospitals1 asylums1 housing projects1 insurance against unemployment1 sickness1 and old age1 and benevolent and scientific purposes generally1--constitute the best objects and agencies of effective distribution4 ,by these means social and individual efficiency would be so improved within a few years that the distress due to economic causes would for the most part have disappeared4 ,the proposition that men are under moral obligation to give away the greater portion of their superfluous goods or income is1 indeed1 a hard saying4 ,not improbably it will strike the majority of persons who read these pages as extreme and fantastic4 ,no ,catholic1 however1 who knows the traditional teaching of the ,church on the right use of wealth1 and who considers patiently and seriously the magnitude and the meaning of human distress1 will be able to refute the proposition by reasoned arguments4 ,indeed1 no man can logically deny it who admits that men are intrinsically sacred1 and essentially equal by nature and in their claims to a reasonable livelihood from the common heritage of the earth4 ,the wants that a man supplies out of his superfluous goods are not necessary for rational existence4 ,for the most part they bring him merely irrational enjoyment1 greater social prestige1 or increased domination over his fellows4 ,judged by any reasonable standard1 these are surely less important than those needs of the neighbour which are connected with humane living4 ,if any considerable part of the community rejects these propositions the explanation will be found not in a reasoned theory1 but in the conventional assumption that a man may do what he likes with his own4 ,this assumption is adopted without examination1 without criticism1 without any serious advertence to the great moral facts that ownership is stewardship1 and that the ,creator intended the earth for the reasonable support of all the children of men4 ,a ,false ,conception of ,welfare and ,superfluous ,goods ,if all the present owners of superfluous goods were to carry out their own conception of the obligation1 the amount distributed would be only a fraction of the real superabundance4 ,let us recall the definition of absolute superfluity as1 that portion of individual or family income which is not required for the reasonable maintenance of life and social position4 ,it allows1 of course1 a reasonable provision for the future4 ,but the great majority of possessors1 as well as perhaps the majority of others1 do not interpret their needs1 whether of life or social position1 in any such strict fashion4 ,those who acquire a surplus over their present absolute and conventional needs1 generally devote it to an expansion of social position4 ,they move into larger and more expensive houses1 thereby increasing their assumed requirements1 not merely in the matter of housing1 but as regards food1 clothing1 amusements1 and the conventions of the social group with which they are affiliated4 ,in this way the surplus which ought to have been distributed is all absorbed in the acquisition and maintenance of more expensive standards4 ,all classes of possessors adopt and act upon an exaggerated conception of both the strict and the conventional necessities4 ,in taking this course1 they are merely subscribing to the current theory of life and welfare4 ,it is commonly assumed that to be worth while life must include the continuous and indefinite increase of the number and variety of wants1 and a corresponding growth and variation in the means of satisfying them4 ,very little endeavour is made to distinguish between kinds of wants1 or to arrange them in any definite scale of moral importance4 ,desires for purely physical goods1 such as1 food1 drink1 adornment1 and sense gratifications generally1 are put on the same level with the demands of the spiritual1 moral1 and intellectual faculties4 ,the value and importance of any and all wants is determined mainly by the criterion of enjoyment4 ,in the great majority of cases this means a preference for the goods and experiences that minister to the senses4 ,since these satisfactions are susceptible of indefinite increase1 variety1 and cost1 the believer in this theory of life-values readily assumes that no practical limit can be set to the amount of goods or income that will be required to make life continuously and progressively worth living4 ,hence the question whether he has superfluous goods1 how much of a surplus he has1 or how much he is obliged to distribute1 scarcely occurs to him at all4 ,everything that he possesses or is likely to possess1 is included among the necessaries of life and social position4 ,he adopts as his working theory of life those propositions which were condemned as scandalous and pernicious by ,pope ,innocent ,,xi in #afgi3 ,it is scarcely possible to find among people engaged in worldly pursuits1 even among kings1 goods that are superfluous to social position4 ,therefore1 hardly any one is bound to give alms from this source4 ,the practical consequences of this false conception of welfare are naturally most conspicuous among the rich1 especially the very rich1 but they are also manifest among the comfortable and middle classes4 ,in every social group above the limit of very moderate circumstances1 too much money is spent for material goods and enjoyments1 and too little for the intellectual1 religious1 and altruistic things of life4 ,the ,true ,conception of ,welfare ,this working creed of materialism is condemned by right reason1 as well as by ,christianity4 ,the teaching of ,christ on the worth of material goods is expressed substantially in the following texts3 ,woe to you rich4 ,blessed are you poor4 ,lay not up for yourselves treasures on earth4 ,for a man's life consisteth not in the abundance of things that he possesseth4 ,be not solicitous as to what you shall eat1 or what you shall drink1 or what you shall put on4 ,seek ye first the kingdom of ,god and his justice1 and all these things shall be added unto you4 ,you cannot serve ,god and ,mammon4 ,if thou wouldst be perfect1 go1 sell what thou hast and give to the poor1 and come follow me4 ,reason informs us that neither our faculties nor the goods that satisfy them are of equal moral worth or importance4 ,the intellectual and spiritual faculties are essentially and intrinsically higher than the sense faculties4 ,only in so far as they promote1 either negatively or positively1 the development of the mind and soul have the senses any reasonable claim to satisfaction4 ,they have no value in themselves2 they are merely instruments to the welfare of the spirit1 the intellect1 and the disinterested will4 ,right life consists1 not in the indefinite satisfaction of material wants1 but in the progressive endeavour to know the best that is to be known1 and to love the best that is to be loved2 that is1 ,god and ,his creatures in the order of their importance4 ,the man who denies the intrinsic superiority of the soul to the senses1 who puts sense gratifications on the same level of importance as the activities of mind1 and spirit1 and disinterested will1 logically holds that the most degrading actions are equally good and commendable with those which mankind approves as the noblest4 ,his moral standard does not differ from that of the pig1 and he himself is on no higher moral level than the pig4 ,those who accept the view of life and welfare taught by ,christianity and reason cannot1 if they take the trouble to consider the matter1 avoid the conclusion that the amount of material goods which can be expended in the rational and justifiable satisfaction of the senses1 is very much smaller than is to-day assumed by the great majority of persons4 ,somewhere between five and ten thousand dollars a year lies the maximum expenditure that any family can reasonably devote to its material wants4 ,this is independent of the outlay for education1 religion1 and charity1 and the things of the mind generally4 ,in the overwhelming majority of cases in which more than five to ten thousand dollars are expended for the satisfaction of material needs1 some injury is done to the higher life4 ,the interests of health1 intellect1 spirit1 or morals would be better promoted if the outlay for material things were kept below the specified limit4 ,the distribution advocated in this chapter is obviously no substitute for justice or the deeds of justice4 ,inasmuch1 however1 as complete justice is a long way from realisation1 a serious attempt by the possessors of true superfluous goods to fulfil their obligations of distribution would greatly counteract and soften existing injustice1 inequality1 and suffering4 ,hence1 benevolent giving deserves a place in any complete statement of proposals for a better distribution of wealth4 ,moreover1 we are not likely to make great advances on the road of strict justice until we acquire saner conceptions of welfare1 and a more effective notion of brotherly love4 ,so long as men put the senses above the soul1 they will be unable to see clearly what is justice1 and unwilling to practise the little that they are able to see4 ,those who exaggerate the value of sense gratifications cannot be truly charitable1 and those who are not truly charitable cannot perform adequate justice4 ,the achievement of social justice requires not merely changes in the social mechanism1 but a change in the social spirit1 a reformation in men's hearts4 ,to this end nothing could be more immediately helpful than a comprehensive recognition of the stewardship of wealth1 and the duty of distributing superfluous goods4 ,,references ,,on ,,section ,,iii ,,ely3 ,monopolies and ,trusts4 ,macmillan2 #aijj4 ,,van ,,hise3 ,concentration and ,control4 ,macmillan2 #aiab4 ,,stevens3 ,industrial ,combinations and ,trusts4 ,macmillan2 #aiac4 ,,russell3 ,business1 the ,heart of the ,nation4 ,john ,lane2 #aiaa4 ,,garriguet3 ,rgime du ,travail4 ,paris2 #aiji4 ,the ,social ,value of the ,gospel4 ,st4 ,louis2 #aiaa4 ,,hobson3 ,work and ,wealth1 a ,human ,valuation4 ,macmillan2 #aiad4 ,,west3 ,the ,inheritance ,tax4 ,new ,york2 #aijh4 ,,seligman3 ,progressive ,taxation4 ,princeton2 #aijh4 ,the ,income ,tax4 ,new ,york2 #aiac4 ,,bouquillon3 ,de ,virtutibus ,theologicis4 ,brugis2 #ahij4 ,also1 the works of ,taussig1 ,devas1 ,hobson1 ,antoine1 ,pesch1 ,carver1 ,vermeersch1 ,nearing1 and ,king which are cited in connection with the introductory chapter4 ,,footnotes3 #bja ,summa ,theologica1 #b;a4 #b;ae41 q4 #ff1 a4 #c4 #bjb ,patrologia ,graeca1 vol4 #ca1 cols4 #bge1 #bgh4 #bjc ,patrologia ,latina1 vol4 #cg1 col4 #aibb4 #bjd ,patrologia ,latina1 vol4 #ad1 col4 #gdg4 #bje ,patrologia ,latina1 vol4 #gg1 col4 #hg4 ,these and several other extracts of like tenor may be found in ,ryan's ,alleged ,socialism of the ,church ,fathers1 ch4 i2 ,st4 ,louis1 #aiac4 #bjf ,op4 cit41 #b;a4 #b;ae41 q4 #ff1 a4 #g4 #bjg ,encyclical1 ,on the ,condition of ,labour1 ,may #ae1 #ahia4 #bjh ,encyclical1 ,on ,socialism1 ,communism1 ,nihilism1 ,dec4 #bh1 #ahgh4 #bji ,op4 cit41 #b;a4 #b;ae41 q4 #cb1 a4 #a4 #baj ,idem1 q4 #ff1 a4 #g4 #baa ,a comprehensive1 though brief1 discussion of this question and numerous references are contained in ,bouquillon1 ,de ,virtutibus ,theologicis1 pp4 #ccb-cdh4 ,when ,pope ,leo ,,xiii declared that the rich are obliged to distribute out of their superfluity1 he did not mean that they are free to give only a portion thereof4 ,the particle de in his statement1 officium est de eo quod superat gratificari indigentibus1 is not correctly translated by some4 ,it means rather out of1 from1 or with2 so that the affluent are commanded to devote their superfluous goods indefinitely to the relief of the needy4 ,in the ,encyclical1 ,quot ,apostolici ,muneris1 he used the expression1 gravissimo divites urget praecepto ut quod superest pauperibus tribuant1 which clearly declares the duty of distributing all4 #bab ,the ,wealth and ,income of the ,people of the ,united ,states1 pp4 #bbd-bbf4 ,,section ,,iv ,,the ,,moral ,,aspect ,,of ,,wages ,,chapter ,,xxii ,,some ,,unacceptable ,,theories ,,of ,,wage-,,justice ,it may be that we are not merely chasing a will-o'-the-wisp when we are hunting for a reasonable wage1 but we are at any rate seeking the unattainable4 ,thus wrote ,professor ,frank ,haight ,dixon in a paper read at the twenty-seventh annual meeting of the ,american ,economic ,association1 ,december1 #aiad4 ,whether he reflected the opinion of the majority of the economists1 he at least gave expression to a thought that has frequently suggested itself to every one who has gone into the wage question free from prejudices and preconceived theories4 ,one of the most palpable indications of the difficulty to which ,professor ,dixon refers is the number of doctrines concerning wage justice that have been laboriously built up during the ,christian era1 and that have failed to approve themselves to the majority of students and thinkers4 ,in the present chapter the attempt is made to set forth some of the most important of these doctrines1 and to show wherein they are defective4 ,they can all be grouped under the following heads3 ,the ,prevailing-,rate ,theory2 ,exchange-,equivalence ,theories2 and the ,productivity ,theories4 ,i4 ,,the ,,prevailing-,,rate ,,theory ,this is not so much a systematic doctrine as a rule of expediency devised to meet concrete situations in the absence of any better guiding principle4 ,both its basis and its nature are well exemplified in the following extract from the ,report of the ,board of ,arbitration in the ,matter of the ,controversy ,between the ,eastern ,railroads and the ,brotherhood of ,locomotive ,engineers3#bac ,possibly there should be some theoretical relation for a given branch of industry between the amount of the income that should go to labour and the amount that should go to capital2 and if this question were decided1 a scale of wages might be devised for the different classes of employs which would determine the amount rightly absorbed by labour4444 ,thus far1 however1 political economy is unable to furnish such a principle as that suggested4 ,there is no generally accepted theory of the division between capital and labour4444 ,what1 then1 is the basis upon which a judgment may be passed as to whether the existing wage scale of the engineers in the ,eastern ,district is fair and reasonable8 ,it seems to the ,board that the only practicable basis is to compare the rates and earnings of engineers in the ,eastern ,district with those of engineers in the ,western and ,southern ,districts1 and with those of other classes of railway employs4 ,six of the seven men composing this board of arbitration subscribed to this statement4 ,of the six one is the president of a great state university1 another is a successful and large-minded merchant1 the third is a great building contractor1 the fourth is a distinguished lawyer1 the fifth is a prominent magazine editor1 and the sixth is a railway president4 ,the dissenting member represented the employs4 ,since the majority could not find in any generally accepted theory a principle to determine the proper division of the product between capital and labour1 they were perhaps justified in falling back upon the practical rule that they adopted4 ,not in ,harmony with ,justice ,from the viewpoint of justice1 however1 this rule or standard is utterly inadequate4 ,it is susceptible of two interpretations4 ,wages prevailing elsewhere1 may mean either the highest rates or those most frequently occurring4 ,according to the latter understanding1 only those wages which were below the majority rates should be raised1 while all those above that level ought to be lowered4 ,in almost all cases this would mean a reduction of the highest wages1 as these are usually paid only to a minority of the workers of any grade4 ,the adoption of the highest existing rates as a standard would involve no positive losses1 but it would set a rigid limit to all possible gains in the future4 ,according to either interpretation of the prevailing rate1 the increases in wages which a powerful labour union seeks to obtain are unjust until they have been established as the prevailing rates4 ,thus1 the attorney for the street railways of ,chicago dissented from the increases in wages awarded to the employs by the majority of the board of arbitration in the summer of #aiae because1 these men are already paid not only a fair wage but a liberal wage1 when the wages in the same employment and the living conditions in other large cities are taken into consideration1 or when comparison is made of these men's annual earnings with the earnings in any comparable line of work in the city of ,chicago4#bad ,in other words1 the dominant thing is always the right thing4 ,justice is determined by the preponderance of economic force4 ,now1 a rule such as this1 which condemns improvement until improvement has somehow become general1 which puts a premium upon physical and intellectual strength1 and which disregards entirely the moral claims of human needs1 efforts1 and sacrifices1 is obviously not an adequate measure of either reason or justice4 ,and we may well doubt that it would be formally accepted as such by any competent and disinterested student of industrial relations4 ,,ii4 ,,exchange-,,equivalence ,,theories ,according to these theories1 the determining factor of wage justice is to be found in the wage contract4 ,the basic idea is the idea of equality1 inasmuch as equality is the fundamental element in the concept of justice4 ,the principle of justice requires that equality should be maintained between what is owed to a person and what is returned to him1 between the kinds of treatment accorded to different persons in the same circumstances4 ,similarly it requires that equality should obtain between the things that are exchanged in onerous contracts4 ,an onerous contract is one in which both parties undergo some privation1 and neither intends to confer a gratuity upon the other4 ,each exchanger desires to obtain the full equivalent of the thing that he transfers4 ,since each is equal in personal dignity an intrinsic worth to the other1 each has a strict right to this full equivalent4 ,owing to the essential moral equality of all men1 no man has a right to make of another a mere instrument to his own interests through physical force or through an onerous contract4 ,men have equal rights not only to subsist upon the earth1 but to receive benefits from the exchange of goods4 ,the ,rule of ,equal ,gains ,the agreement between employer and employ is an onerous contract2 hence it ought to be made in such terms that the things exchanged will be equal1 that the remuneration will be equal to the labour4 ,how can this equivalence be determined and ascertained8 ,not by a direct comparison of the two objects1 work and pay1 for their differences render them obviously incommensurable4 ,some third term1 or standard1 of comparison is required in which both objects can find expression4 ,one such standard is individual net advantage4 ,inasmuch as the aim of the labour contract is reciprocal gain1 it is natural to infer that the gains ought to be equal for the two parties4 ,net gain is ascertained by deducting in each case the utility transferred from the utility received2 in other words1 by deducting the privation from the gross return4 ,the good received by the employer when diminished by or weighed against the amount that he pays in wages should be equal to the good received by the labourer when diminished by or weighed against the inconvenience that he undergoes through the expenditure of his time and energy4 ,hence the contract should bring to employer and employ equal amounts of net advantage or satisfaction4 ,plausible as this rule may appear1 it is impracticable1 inequitable1 and unjust4 ,in the vast majority of labour contracts it is impossible to know whether both parties obtain the same quantity of net advantage4 ,the gains of the employer can1 indeed1 be frequently measured in terms of money1 being the difference between the wages paid to and the specific product turned out by the labourer4 ,in the case of the labourer no such process of deduction is possible2 for advantage and expenditure are incommensurable4 ,we cannot subtract the labourer's privation1 that is1 his expenditure of time and energy1 from his gross advantage1 that is1 his wages4 ,how can we know or measure the net benefit obtained by a man who shovels sand ten hours for a wage of two dollars8 ,how can we deduct his pain-cost from or weigh it against his compensation8 ,so far as the two sets of advantages are comparable at all1 those of the employ would seem to be always greater than those of the employer4 ,a wage of seventy-five cents a day enables the labourer to satisfy the most important wants of life4 ,weighed against this gross advantage1 his pain-cost of toil is relatively insignificant4 ,his net advantage is the greatest that a man can enjoy1 the continuation of his existence4 ,the net advantage received by the employer from such a wage contract is but a few cents1 the equivalent of a cigar or two4 ,even if the wage be raised to the highest level yet reached by any wage earner1 the net advantage to the labourer1 namely1 his livelihood1 will be greater than the net advantage to the employer from that single contract4 ,moreover1 the sum total of an employer's gains from all his labour contracts is less quantitatively than the sum total of the gains obtained by all his employs4 ,the latter gains provide for many livelihoods1 the former for only one4 ,again1 no general rate of wages could be devised which would enable all the members of a labour group to gain equally4 ,differences in health1 strength1 and intelligence would cause differences in the pain-cost involved in a given amount of labour2 while differences in desires1 standards of living1 and skill in spending would bring about differences in the satisfactions derived from the same compensation4 ,finally1 various employers would obtain various money gains from the same wage outlay1 and various advantages from the same money gains4 ,hence if the rule of equality of net advantages were practicable it would be inequitable4 ,it is also fundamentally unjust because it ignores the moral claims of needs1 efforts1 and sacrifices as regards the labourer4 ,as we have seen in the chapter on profits in competitive conditions1 and as we shall have occasion to recognise again in a later chapter1 no canon or scheme of distributive justice is acceptable that does not give adequate consideration to these fundamental attributes of human personality4 ,the ,rule of ,free ,contract ,another form of the exchange equivalence theory would disregard the problem of equality of gains1 and assume that justice is realised whenever the contract is free from force or fraud4 ,in such circumstances both parties gain something1 and presumably are satisfied2 otherwise1 they would not enter the contract4 ,probably the majority of employers regard this rule as the only available measure of practicable justice4 ,the majority of economists likewise subscribed to it during the first half of the nineteenth century4 ,in the words of ,henry ,sidgwick1 the teaching of the political economists pointed to the conclusion that a free exchange1 without fraud or coercion1 is also a fair exchange4#bae ,apparently the economists based this teaching on the assumption that competition was free and general among both labourers and employers4 ,in other words1 the rule as understood by them was probably identical with the rule of the market rate1 which we shall examine presently4 ,it is not at all likely that the economists here referred to would have given their moral approval to those free contracts in which the employer pays starvation wages because he takes advantage of the ignorance of the labourer1 or because he exercises the power of monopoly4 ,no matter by whom it is or has been held1 the rule of free contract is unjust4 ,in the first place1 many labour contracts are not free in any genuine sense4 ,when a labourer is compelled by dire necessity to accept a wage that is insufficient for a decent livelihood1 his consent to the contract is free only in a limited and relative way4 ,it is what the moralists call voluntarium imperfectum4 ,it is vitiated to a substantial extent by the element of fear1 by the apprehension of a cruelly evil alternative4 ,the labourer does not agree to this wage because he prefers it to any other1 but merely because he prefers it to unemployment1 hunger1 and starvation4 ,the agreement to which he submits in these circumstances is no more free than the contract by which the helpless wayfarer gives up his purse to escape the pistol of the robber4 ,while the latter action is free in the sense that it is chosen in preference to a violent death1 it does not mean that the wayfarer gives1 or intends to give1 the robber the right of ownership in the purse4 ,neither should the labourer who from fear of a worse evil enters a contract to work for starvation wages1 be regarded as transferring to the employer the full moral right to the services which he agrees to render4 ,like the wayfarer1 he merely submits to superior force4 ,the fact that the force imposed upon him is economic instead of physical does not affect the morality of the transaction4 ,to put the matter in another way1 the equality which justice requires is wanting in an oppressive labour contract because of the inequality existing between the contracting parties4 ,in the words of ,professor ,ely3 ,free contract supposes equals behind the contract in order that it may produce equality4#baf ,again1 the rule of free contract is unjust because it takes no account of the moral claims of needs4 ,a man whose only source of livelihood is his labour does wrong if he accepts a starvation wage willingly4 ,such a contract1 however free1 is not according to justice because it disregards the requirements of reasonable life4 ,no man has a right to do this1 any more than he has a right to perpetrate self mutilation or suicide4 ,the ,rule of ,market ,value ,a third method of interpreting exchange equivalence is based upon the concept of value4 ,labour and compensation are thought to be equal when the value of one is equal to the value of the other4 ,then the contract is just and the compensation is just4 ,the only objection to these propositions is that they are mere truisms4 ,what does value mean1 and how is it to be determined8 ,if it is to receive an ethical signification2 if the value of labour is to be understood as denoting not merely the value that labour will command in a market1 but the value that labour ought to have1--the statement that wages should equal the value of labour becomes merely an identical proposition4 ,all that it tells us is that wages ought to be what they ought to be4 ,in its simplest economic sense value denotes purchasing power1 or importance in exchange4 ,as such1 it may be either individual or social2 that is1 it may mean the exchange importance attributed to a commodity by an individual1 or that attributed by a social group4 ,in a competitive society social value is formed through the higgling of the market1 and is expressed in market price4 ,now individual value is utterly impracticable as a measure of exchange equivalence in the wage contract4 ,since the value attributed to labour by the employer differs in the great majority of instances from that estimated by the labourer himself1 it is impossible to determine which is the true value1 and the proper measure of just wages4 ,the doctrine that the social value or market price of labour is also the ethical value or just price1 is sometimes called the classical theory1 inasmuch as it was held1 at least implicitly1 by the majority of the early economists of both ,france and ,england4#bag ,under competitive conditions1 said the ,physiocrats1 the price of labour as of all other things corresponds to the cost of production2 that is1 to the cost of subsistence for the labourer and his family4 ,this is the natural law of wages1 and being natural it is also just4 ,adam ,smith likewise declared that competitive wages were natural wages1 but he refrained from the explicit assertion that they were just wages4 ,nevertheless his abiding and oft-expressed faith in the theory that men's powers were substantially equal1 and in the social beneficence of free competition1 implied that conclusion4 ,although the great majority of his followers denied that economics had moral aspects1 and sometimes asserted that there was no such thing as just or unjust wages1 their teaching tended to convey the thought that competitively fixed wages were more or less in accordance with justice4 ,as noted above1 their belief in the efficacy of competition led them to the inference that a free contract is also a fair contract4 ,by a free contract they meant for the most part one that is made in the open market1 that is governed by the forces of supply and demand1 and that1 consequently1 expresses the social economic value of the things exchanged4 ,all the objections that have been brought against the rule of the prevailing rate apply even more strongly to the doctrine of the market rate4 ,the former takes as a standard the scale of wages most frequently paid in the market1 while the latter approves any scale that obtains in any group of labourers or section of the market4 ,both accept as the ultimate determinant of wage justice the preponderance of economic force4 ,neither gives any consideration to the moral claims of needs1 efforts1 or sacrifices4 ,unless we are to identify justice with power1 might with right1 we must regard these objections as irrefutable1 and the market value doctrine as untenable4 ,the ,medival ,theory ,another exchange-equivalence theory which turns upon the concept of value is that found in the pages of the medival canonists and theologians4 ,but it interprets value in a different sense from that which we have just considered4 ,as the measure of exchange equivalence the medival theory takes objective value1 or true value4 ,however1 the proponents of this view did not formally apply it to wage contracts1 nor did they discuss systematically the question of just wages4 ,they were not called upon to do this2 for they were not confronted by any considerable class of wage earners4 ,in the country the number of persons who got their living exclusively as employs was extremely small1 while in the towns the working class was composed of independent producers who sold their wares instead of their labour4#bah ,the question of fair compensation for the town workers was1 therefore1 the question of a fair price for their products4 ,the latter question was discussed by the medival writers formally1 and in great detail4 ,things exchanged should have equal values1 and commodities should always sell for the equivalent of their values4 ,by what rule was equality to be measured and value determined8 ,not by the subjective appreciations of the exchangers1 for these would sometimes sanction the most flagrant extortion4 ,were no other help available1 the starving man would give all he possessed for a loaf of bread4 ,the unscrupulous speculator could monopolise the supply of foodstuffs1 and give them an exorbitantly high value which purchasers would accept and pay for rather than go hungry4 ,hence we find the medival writers seeking a standard of objective value which should attach to the commodity itself1 not to the varying opinions of buyers and sellers4 ,in the thirteenth century ,albertus ,magnus#bai and ,thomas ,aquinas#bbj declared that the proper standard was to be found in labour4 ,a house is worth as many shoes as the labour embodied in the latter is contained in the labour embodied in the former4 ,it is worthy of note that the diagram which ,albertus ,magnus presents to illustrate this formula of value and exchange had been used centuries before by ,aristotle4 ,it is likewise noteworthy that this conception of ethical value bears a striking resemblance to the theory of economic value upheld by ,marxian ,socialists4 ,however1 neither ,aristotle nor the ,schoolmen asserted that all kinds of labour had equal value4 ,now this medival labour-measure of value could be readily applied only to cases of barter1 and even then only when the value of different kinds of labour had already been determined by some other standard4 ,accordingly we find the medival writers expounding and defending a more general interpretation of objective or true value4 ,this was the concept of normal value2 that is1 the average or medium amount of utility attributed to goods in the average conditions of life and exchange4 ,on the one hand1 it avoided the excesses and the arbitrariness of individual estimates2 on the other hand1 it did not attribute to value the characters of immutability and rigidity4 ,contrary to the assumptions of some modern writers1 the ,schoolmen never said that value was something as fixedly inherent in goods as physical and chemical qualities4 ,when they spoke of intrinsic value1 they had in mind merely the constant capacity of certain commodities to satisfy human wants4 ,even to-day bread has always the intrinsic potency of alleviating hunger1 regardless of all the fluctuations of human appraisement4 ,the objectivity that the medival writers ascribed to value was relative4 ,it assumed normal conditions as against exceptional conditions4 ,to say that value was objective merely meant that it was not wholly determined by the interplay of supply and demand1 but was based upon the stable and universally recognised use-qualities of commodities in a society where desires1 needs1 and tastes were simple and fairly constant from one generation to another4 ,how or where was this relatively objective value of goods to find concrete expression8 ,in the communis aestimatio1 or social estimate1 declared the canonists4 ,objective value and just price would be ascertained practically through the judgment of upright and competent men1 or preferably through legally fixed prices4 ,but neither the social estimate nor the ordinances of lawmakers were authorised to determine values and prices arbitrarily4 ,they were obliged to take into account certain objective factors4 ,in the thirteenth and fourteenth centuries1 the factors universally recognised as determinative were the utility or use-qualities of goods1 but especially their cost of production4 ,later on1 in the sixteenth and seventeenth centuries1 risk and scarcity were given considerable prominence as value determinants4 ,now cost of production in the ,middle ,ages was mainly labour cost2 hence the standard of value was chiefly a labour standard4 ,moreover1 this labour doctrine of true value and equality in exchanges was strongly reinforced by another medival principle1 according to which labour was the supreme if not the only just title to rewards4 ,how was labour cost to be measured1 and the different kinds of labour evaluated8 ,by the necessary and customary expenditures of the class to which the labourer belonged4 ,medival society was composed of a few definite1 easily recognised1 and relatively fixed orders or grades1 each of which had its own function in the social hierarchy1 its own standard of living1 and its moral right to a livelihood in accordance with that standard4 ,like the members of the other orders1 the labourers were conceived as entitled to live in conformity with their customary class-requirements4 ,from this it followed that the needs of the labourer became the main determinant of the cost of production1 and of the value and just price of goods4 ,inasmuch as the standards of living of the various divisions of the workers were fixed by custom1 and limited by the restricted possibilities of the time1 they afforded a fairly definite measure of value and price1--much more definite than the standard of general utility4 ,to ,langenstein1 vice chancellor of the ,university of ,paris in the latter half of the fourteenth century1 the matter seemed quite simple2 for he declared that every one could determine for himself the just price of his wares by referring to the customary needs of his rank of life4#bba ,nevertheless1 class needs are not and cannot be a standard of exchange-equivalence4 ,they cannot become a criterion of equality1 a common denominator1 a third term of comparison1 between labour and wages4 ,when we say that a given amount of wages is equal to a given content of livelihood1 we express a purely economic1 positive1 and mathematical relation3 when we say that a given amount of labour is equal to a given content of livelihood1 we are either talking nonsense or expressing a purely ethical relation2 that is1 declaring that this labour ought to equal this livelihood4 ,in other words1 we are introducing a fourth term of comparison2 namely1 the moral worth or personal dignity of the labourer4 ,thus1 we have not a single and common standard to measure both labour and wages1 and to indicate a relation of equality between them4 ,while class needs directly measure wages1 they do not measure labour1 either quantitatively1 or qualitatively1 or under any other aspect or category4 ,aside from this purely theoretical defect1 the canonist doctrine of wage justice was fairly satisfactory as applied to the conditions of the ,middle ,ages4 ,it assured to the labourer of that day a certain rude comfort1 and probably as large a proportion of the product of industry as was practically attainable4 ,nevertheless it is not a universally valid criterion of justice in the matter of wages2 for it makes no provision for those labourers who deserve a wage in excess of the cost of living of their class2 nor does it furnish a principle by which a whole class of workers can justify their advance to a higher standard of living4 ,it is not sufficiently elastic and dynamic4 ,a ,modern ,variation of the ,medival ,theory ,in spite of its fundamental impossibility1 the concept of exchange-equivalence still haunts the minds of certain ,catholic writers4#bbb ,they still strive to get a formula to express equality between labour and remuneration4 ,perhaps the best known and least vulnerable of the attempts made along this line is that defended by ,charles ,antoine1 ,s4,j4#bbc ,justice1 he declares1 demands an objective equivalence between wages and labour2 and objective equivalence is determined and measured by two factors4 ,the remote factor is the cost of decent living for the labourer2 the proximate factor is the economic value of his labour4 ,the former describes the minimum to which the worker is entitled2 the latter comprises perfect and adequate justice4 ,in case of conflict between the two factors1 the first is determinative of and morally superior to the second2 that is to say1 no matter how small the economic value of labour may seem to be1 it never can descend below the requisites of a decent livelihood4 ,now1 neither of these standards is in harmony with the principle of exchange-equivalence1 nor capable of serving as a satisfactory criterion of wage justice4 ,father ,antoine argues that labour is always the moral equivalent of a decent livelihood because the worker expends his energies1 and gives out a part of his life in the service of his employer4 ,unless his wage enables the labourer to replace these energies and conserve his life1 it is not the equivalent of the service4 ,if the wage falls short of this standard the labourer gives more than he receives1 and the contract is essentially unjust4 ,in this conception of equivalence1 energy expended1 instead of cost of living1 becomes the term of comparison and the common measure of labour and remuneration4 ,energy expended is1 however1 technically incapable of providing such a common standard2 for it does not measure both related terms in the same way4 ,the service rendered to the employer is the effect rather than the equivalent of the energy expended2 and the compensation is a means to the replacement of this energy rather than its formal equivalent4 ,moreover1 the formula does not even furnish an adequate rational basis for the claim to a decent minimum wage4 ,a wage which is merely adequate to the replacement of expended energy and the maintenance of life1 is really inadequate to a decent livelihood4 ,such compensation would cover only physical health and strength1 leaving nothing for intellectual1 spiritual1 and moral needs4 ,as ,father ,antoine himself admits and contends1 the latter needs are among the elements of a decent livelihood1 and a wage which does not make reasonable provision for them fails to comply with the minimum requirements of justice4 ,the second factor of objective equivalence is even more questionable than the first4 ,to be completely just1 says ,father ,antoine1 wages must be not merely adequate to a decent livelihood1 but equivalent to the economic value of the labour 7la valeur conomique du travail74 ,this economic value is determined objectively by the cost of production1 the utility of the product1 and the movement of supply and demand2 subjectively1 by the judgment of employers and employs4 ,in case of conflict between these two measures of value1 and in case of uncertainty concerning the objective measure1 the decision of the subjective determinant must always prevail4 ,these statements are hopelessly ambiguous and confusing4 ,if the objective measure of economic value is to be understood in a purely positive way1 it merely means the wages that actually obtain in a competitive market4 ,in the purely positive or economic sense1 the utility of labour is measured by what it will command in the market1 the movement of supply and demand is likewise reflected in market wages1 and the determining effect of cost of production is also seen in the share that the market awards to labour after the other factors of production have taken their portions of the product4 ,in other words1 the economic value of labour is simply its market value4 ,this1 however1 is not ,father ,antoine's meaning2 for he has already declared that the economic value of labour is never less than the equivalent of a decent livelihood1 whereas we know that the market value often falls below that level4 ,in his mind1 therefore1 economic value has an ethical signification4 ,it indicates at least the requisites of decent living1 and it embraces more than this in some cases4 ,when8 and how much more8 ,let us suppose a business so prosperous that it returns liberal profits to the employer and the prevailing rate of interest on the capital1 and yet shows a surplus sufficient to give all the labourers ten dollars a day4 ,is cost of production to be interpreted here as allowing only the normal rate of profits and interest to the business man and the capitalist1 leaving the residue to labour8 ,or is it to be understood as requiring that the surplus be divided among the three agents of production8 ,in other words1 is the economic value of labour in such cases to be determined by some ethical principle which tells beforehand how much the other agents than labour ought to receive8 ,if so1 what is this principle or formula8 ,none of these questions is satisfactorily answered in ,father ,antoine's pages4 ,they are all to be solved by having recourse to the subjective determinant of economic value2 namely1 the judgment of employers and employs4 ,thus his proximate factor of justice in wages1 his formula of complete as against minimum just wages1 turns out to be something entirely subjective1 and more or less arbitrary4 ,it is in no sense a measure of the equivalence between work and pay4 ,moreover1 it is inadequate as a measure of justice4 ,should the majority of both employers and employs fix the economic value of the labour of carpenters at five dollars a day1 there would be no certainty that this decision was correct1 and that this figure represented just wages4 ,should they determine upon a rate of fifty dollars a day1 we could not be sure that their decision was unjust4 ,undoubtedly the combined judgment of employers and employs will set a fairer wage than one fixed by either party alone1 since it will be less one-sided2 but there is no sufficient reason for concluding that it will be in all cases completely just4 ,undoubtedly employers and employs know what wages an industry can afford at prevailing prices1 on the assumption that business ability and capital are to have a certain rate of return2 but there is no certainty that the prevailing prices are fair1 or that the assumed rates of profits and interest are fair4 ,in a word1 the device is too arbitrary4 ,to sum up the entire discussion of exchange-equivalence theories3 ,their underlying concept is fundamentally unsound and impracticable4 ,all of them involve an attempt to compare two entities which are utterly incommensurate4 ,there exists no third term1 or standard1 or objective fact1 which will inform men whether any rate of wages is the equivalent of any quantity of labour4 ,,iii4 ,,productivity ,,theories ,the productivity concept of wage justice appears in a great variety of forms4 ,the first of them that we shall consider is advocated mainly by the ,socialists1 and is usually referred to as the theory of the right to the whole product of labour4#bbd ,labour's ,right to the ,whole ,product ,we have seen that ,adam ,smith's belief in the normality and beneficence of free competition would have logically led him to the conclusion that competitive wages were just2 and we know that this doctrine is implicit in his writings4 ,on the other hand1 his theory that all value is determined by labour would seem to involve the inference that all the value of the product belongs to the labourer4 ,as a matter of fact1 ,smith restricted this conclusion to primitive and pre-capitalist societies4 ,apparently he1 and his disciples in an even larger degree1 was more interested in describing the supposed beneficence of competition than in justifying the distribution that resulted from the competitive process4 ,the early ,english ,socialists were more consistent4 ,in #agic ,william ,godwin1 whom ,anton ,menger calls the first scientific ,socialist of modern times1 laid down in substance the doctrine that the labourer has a right to the whole product4#bbe ,in #ahje ,charles ,hall formulated and defended the doctrine with greater precision and consistency4#bbf ,in #ahbd the doctrine was stated more fundamentally1 systematically1 and completely by ,william ,thompson4#bbg ,he accepted the labour theory of value laid down by ,adam ,smith1 and formally derived therefrom the ethical conclusion that the labourer has a right to the whole product4 ,thompson and his followers are only original in so far as they consider rent and interest to be unjust deductions1 which violate the right of the labourer to the whole product of his labour4#bbh ,he denounced the laws which empowered the land owner and the capitalist to appropriate value not created by them1 and gave to the value thus appropriated the name1 surplus value4 ,in the use of this term he anticipated ,karl ,marx by several years4 ,his doctrines were adopted and defended by many other ,english ,socialist writers1 and were introduced into ,france by the followers of ,saint-,simon4 ,from his works1 says ,menger1 the later ,socialists1 the ,saint-,simonians1 ,proudhon1 and above all1 ,marx and ,rodbertus1 have directly or indirectly drawn their opinions4#bbi ,although ,saint-,simon never accepted the doctrine of the labourer's right to the whole product1 his disciples1 particularly ,enfantin and ,bazard1 taught it implicitly4 ,in a just social state1 they maintained1 every one would be expected to labour according to his capacity1 and would be rewarded according to his product4#bcj ,perhaps the most theoretical and extreme statement of the theory that we are considering is found in the writings of ,p4 ,j4 ,proudhon4#bca ,he maintained that the real value of products was determined by labour time1 and that all kinds of labour should be regarded as equally effective in the value-creating process1 and he advocated therefore equality of wages and salaries4 ,for the realisation of this ideal he drew the outlines of a semi-anarchic social order1 of which the main feature was gratuitous public credit4 ,neither his theories nor his proposals ever obtained any considerable number of adherents4 ,a milder and better reasoned form of the theory was set forth by ,karl ,j4 ,rodbertus4#bcb ,professor ,wagner calls him1 the first1 the most original1 and the boldest representative of scientific ,socialism in ,germany4 ,yet1 as ,menger points out1 ,rodbertus derived many of his doctrines from ,proudhon and the ,saint-,simonians4 ,he admitted that in a capitalist society the value of commodities does not always correspond to the labour embodied in them1 and that different kinds of labour are productive in different degrees4 ,therefore1 he had recourse to the concept of a normal1 or average1 day's labour in any group1 and would have the various members of the group remunerated with reference to this standard4 ,this was to be brought about by a centralised organisation of industry in which the whole product would ultimately go to labour1 and the share of the individual worker would be determined by his contribution of socially necessary labour4 ,although ,karl ,marx adopted and formulated in his own terms the theory that value is determined by labour1 he did not thence deduce the conclusion that labour has a right to the whole product4#bcc ,being a materialist1 he consistently rejected conceptions of abstract justice or injustice1 rights or wrongs4 ,in opposition to the methods of his predecessors1 he endeavoured to discover the historical and positive forces which determined the actual distribution1 and to derive therefrom the laws that were necessarily preparing the way for a new social order4 ,while he contended that rent receivers and interest receivers appropriated the surplus value created by labour1 he refrained from stigmatising this process as morally wrong4 ,it was merely a necessary element of the capitalist system4 ,to call it unjust was in ,marx' view to use language without meaning4 ,as well might one speak of the injustice of a hurricane or an avalanche4 ,not the preaching of abstract justice1 but the inevitable transformation of the capitalist into the collectivist organisation of industry1 would enable labour to obtain its full product4 ,nevertheless1 it is probably true that a majority of the followers of ,marx have drawn from his labour theory of value the inference that all the value of the product belongs by a moral right to the labourer4 ,so deeply fixed in the human conscience is the conception of justice1 and so general is the conviction of the labourer's right to his product1 that most ,socialists have not been able to maintain a position of consistent economic materialism4 ,indeed1 ,marx himself did not always succeed in evading the influence and the terminology of idealistic conceptions4 ,he frequently thought and spoke of the ,socialist rgime as not only inevitable but as morally right1 and of the capitalist system as morally wrong4 ,despite his rigid1 materialistic theorising1 his writings abound in passionate denunciation of existing industrial evils1 and in many sorts of unscientific ethical judgments4#bcd ,in so far as the right to the whole product of labour has been based upon the labour theory of value1 it may be summarily dismissed from consideration4 ,the value of products is neither created nor adequately measured by labour2 it is determined by utility and scarcity4 ,labour does1 indeed1 affect value1 inasmuch as it increases utility and diminishes scarcity1 but it is not the only factor that influences these categories4 ,natural resources1 the desires and the purchasing power of consumers determine value quite as fundamentally as does labour1 and cause it to vary out of proportion to the labour expended upon a commodity4 ,to-day there are probably not many adherents of the right-to-the-whole-product doctrine who attempt to base it upon any theory of value4 ,the majority appeal to the simple and obvious fact that the labourers1 together with the active directors of industry1 are the only human beings who expend energy in the productive process4 ,the only labour that the capitalist and the landowner perform in return for the interest and rent that they respectively receive1 consists in choosing the particular goods in which their money is to be invested4 ,as capitalist and landowner1 they do not participate in the turning out of products4 ,they are owners but not operators of the factors of production4 ,in the sense1 therefore1 of active agents the labourers and the business men are the only producers4 ,whether land and capital should be called productive1 whether the product should be regarded as produced by land and capital as well as by labour and undertaking activity1 is mostly a matter of terminology4 ,inasmuch as they are instrumental in bringing forth the product1 land and capital may properly be designated as productive1 but not in the same sense as labour and business energy4 ,the former are passive factors and instrumental causes of the product1 while the latter are active factors and original causes4 ,moreover1 the former are non-rational entities1 while the latter are attributes of human beings4 ,as we have seen in former chapters1 it is impossible to prove that mere ownership of a productive thing1 such as a cow1 a piece of land1 or a machine1 necessarily creates a right to either the concrete or the conventional product4 ,the formula1 res fructificat domino1 is not a self evident proposition4 ,nor are there any premises available from which the formula can be logically and necessarily deduced4 ,on the other hand1 we cannot prove conclusively that ownership of productive property does not give a right to the product4 ,whence it follows that the owners of land and capital have at least a presumptive claim to take rent and interest from their possessions4 ,moreover1 those owners of capital who would not have saved money without the hope of interest have a just claim thereto on account of their sacrifices in saving4 ,would the ,state be justified in abolishing rent and interest1 and thus enabling labour to obtain the whole product8 ,conceivably this result might be brought about under the present system of private ownership1 or through the substitution of collectivism4 ,were the change made by the former method land and capital would no longer be sought or have value on account of their annual revenues1 but only as receptacles of saving4 ,they would be desired solely as means of accumulating stores of goods which might be exchanged for articles of consumption some time in the future4 ,while we cannot estimate even approximately the decline that would thus occur in the value of land and capital1 we may safely assert that it would be considerable4 ,unless the proprietors received adequate compensation for this loss1 they would be compelled to suffer obvious and grave injustice4 ,any attempt1 however1 to carry out such a scheme1 either with or without compensation1 would inevitably fail4 ,rent might be terminated through the ,single ,tax1 but interest could not be abolished by any mere legal prohibition4 ,nor does ,socialism afford a way out2 for1 as we have seen in a former chapter1 it is an impracticable system4 ,consequently the theory of the right to the whole product of labour is confronted by the final objection that its realisation would involve greater evils and injustices than those which it seeks to abolish4 ,finally1 the theory is radically incomplete4 ,it professes to describe the requirements of justice as between the landowners and capitalists on the one side1 and the wage earners on the other2 but it provides no rule for determining distributive justice as between different classes of labour4 ,in none of its forms does it provide any comprehensive rule or principle to ascertain the difference between the products of different labourers1 and to decide how the product belonging to any group of men as a whole should be divided among the individual members4 ,does the locomotive engineer produce more than the section hand1 the bookkeeper more than the salesman1 the ditch digger more than the teamster8 ,these and countless similar questions are1 from the nature of the productive process1 unanswerable4 ,even if it were ethically acceptable1 the doctrine of the right to the whole product is hopelessly inadequate4 ,as intimated above1 the notion that if the labourer receives compensation according to his product he receives just compensation1 is one of the most prevalent and fundamental concepts in the controversy about wage justice4 ,hence we find it in certain theories which reject the doctrine of the right to the whole product4 ,according to these theories1 not only the labourer but all the agents of production should be rewarded in proportion to their productive contributions4 ,instead of the whole product1 the worker ought to receive that portion of it which corresponds to his specific productivity1 that is1 that portion of the product which represents his productive influence as compared with the productive efficacy of land1 capital1 and business energy4 ,clark's ,theory of ,specific ,productivity ,one of the theories referred to in the last paragraph is that which has been elaborated in great detail and with great ingenuity by ,professor ,john ,bates ,clark4 ,as stated by himself in the opening sentence of the preface to his ,distribution of ,wealth1 its main tenet is1 that the distribution of the income of society is controlled by a natural law1 and that this law1 if it worked without friction1 would give to every agent of production the amount of wealth which that agent creates4 ,in a rgime of perfect competition1 therefore1 the labourer would get1 not the whole product of industry1 but the whole product due to his own exertions4 ,it is impossible1 and indeed unnecessary1 to enter upon an extended examination of this contention4 ,it will be sufficient to state in a summary way the most obvious and cogent objections4 ,without making any examination of ,professor ,clark's theory1 we should expect to find it unconvincing4 ,for the productive process is by analogy an organic process1 in which every factor requires the co-operation of every other factor in order to turn out even the smallest portion of the product4 ,each factor is in its own order the cause of the whole product4 ,consequently no physical portion of the product can be set aside and designated as wholly due to any one factor4 ,can we not1 however1 distinguish the proportionate productive influence exerted by each factor1 and the proportion of the product which represents such productive influence8 ,this is the question to which ,professor ,clark addresses himself with much ingenuity1 subtlety1 and labour1 and to which he returns an affirmative answer4#bce ,he contends that the amount of product added by the presence of the least productive labourer in a group or establishment describes the productivity of that and every other labourer for whom the man in question can be substituted4 ,nevertheless this marginal labourer had the use of some capital1 no matter how little or how poor2 consequently the increment of product which follows his activity is partly due to capital4 ,it represents something other than his own productive power4 ,if his wage equals the value of this increment of product1 he is receiving something more than his specific product4 ,in the second place1 ,professor ,clark maintains that the difference between what a labourer produces when he uses the whole of a certain supply of capital and what he produces when he has shared that capital with another labourer1 represents the specific productivity of the relinquished capital4 ,let us assume that in a given case the difference is ten units of product4 ,when the first man had the whole capital to himself1 the product was one hundred units2 when he shares the use of it with another1 the total product is one hundred and eighty units4 ,as the two men are assumed to be equally productive1 each has to his credit ninety units of product4 ,working with half the capital1 the first man finds that the resulting product is ten units less than when he was using the whole capital4 ,hence these ten units represent the portion that the relinquished capital contributed to the product2 and if the productivity of half the capital is ten units1 that of the whole capital must be twenty units4 ,nevertheless1 the ten units by which the product was enlarged when the man had the whole capital1 did not come into being without his co-operation2 hence they cannot be entirely attributed to the one-half share of the capital4 ,in other words1 the productivity of the relinquished capital seems to be less than ten units4 ,it also seems to be more than ten units2 for we may assume that if each man were to use one-half the capital independently of the other1 the resulting total product would be less than one hundred and eighty units1 or less than ninety units for each4 ,consequently the difference between the product resulting from the first man's use of the whole capital and that resulting from his use of half the capital would be more than ten units2 and this difference is specifically attributable to half the capital4 ,who can say which of these calculations is correct1 or whether either of them is correct8 ,the method of ascertaining specific productivity which has been described in the last paragraph is thought by ,professor ,clark to receive confirmation from the fact that it leads to the same conclusion as the first and more direct method2 namely1 that the specific productivity of labour is expressed in the product of the marginal labourer4 ,as a matter of fact1 this conclusion is yielded by both methods2 for the specific productivity of the first labourer appeared as eighty units1 which was also the specific productivity of the second labourer1 who was the marginal labourer4 ,as we saw in the second last paragraph1 however1 the marginal product is not due to labour alone2 hence the verification provided by the second method is in reality a refutation4 ,apparently the majority of economists do not accept ,professor ,clark's theory2 for of the nine who discussed certain applications of it at the nineteenth annual meeting of the ,american ,economic ,association only one approved it1 three were non-committal1 and five expressed their dissent4#bcf ,even if the theory were true its hypothetical character would deprive it of any practical value4 ,it assumes a rgime of perfect competition1 but this assumption is so seldom realised that no rule based upon it can throw much light on the question of the productivity of present day labourers4 ,even if it were exactly applicable to existing conditions1 that is1 if labourers were actually getting their specific products1 the theory would not provide us with a doctrine of just wages4 ,as we have seen in former chapters1 productivity is neither the only nor the highest canon of justice1 whether as regards the comparative claims of capital and labour1 or as regards the claims of different labourers4 ,the contention that capital ought to command interest because it aids in bringing forth the product1 is neither self evident nor demonstrable by any process of reasoning4 ,even if we should concede that the capitalist has a right to interest by virtue of the productivity of his capital1 we should not therefore conclude that this right is as cogent as the corresponding right of the labourer4 ,in the former case the productive agency is not human nor active1 but only material and passive2 and the recipient of the product performs no labour as capitalist1 but is left free to get a livelihood by personal activity4 ,the productivity of labour differs in all these respects1 and the difference is ethically sufficient to justify the claim that the labourer may sometimes have a right to a part of the specific product of capital4 ,to sum up the matter in the words of ,professor ,wicker3 ,to have proved that the capitalist gets in interest what his capital produces is not to have proved that the capitalist gets what he has earned4 ,to have proved that the landlord gets what his land produces is not to have proved that the landlord earns his distributive share4444 ,economics is not ethics2 explanation is not justification4#bcg ,indeed1 ,professor ,clark nowhere explicitly asserts that productivity is an adequate rule of justice4 ,we might raise the question1 he says1 whether a rule that gives to a man his product is in the highest sense just4#bch ,scattered throughout his volume1 however1 are many expressions which might fairly be interpreted as answering this question in the affirmative4 ,the statements that distribution according to product is a natural law1 and that if the labourer does not get his full specific product he is despoiled1 suggest if they do not imply that wages according to productivity is not merely the economic but the ethical norm4 ,at any rate1 the assumption of productivity as the adequate canon of wage justice1 is very widely adopted1 and is frequently brought forward to give sanction to insufficient rates of remuneration4 ,hence it has been thought well to show that the economic basis of the assumption1 i4e41 that the labourer gets what he produces1 is unproved and unprovable4 ,carver's ,modified ,version of ,productivity ,professor ,carver makes no attempt to ascertain or state the exact physical productivity of labour as compared with that of capital1 but confines his attention to what he calls the economic productivity of a given unit of labour in a given productive process4#bci ,find out accurately how much the community produces with his the labourer's help1 over and above what it produces without his help1 and you have an exact measure of his productivity4#bdj ,by this rule we can determine a man's productivity not only as compared with his inactivity in relation to a given industry or establishment1 but as compared with the productivity of some other man who might be substituted for him4 ,thus understood1 productivity expresses the economic value of a man to the industrial process in which he participates4 ,it determines how much a man is worth1 and consequently1 according to our criterion of justice1 how much a man ought to have as a reward for his work4#bda ,while this conception of productivity is relatively simple1 and the canon of justice based upon it is somewhat plausible1 neither is adequate4 ,to many situations the productivity test is substantially inapplicable4 ,the removal from industry of the man who works alone2 for example1 the independent shoemaker1 blacksmith1 tailor1 or farmer1 would result not in a certain diminution1 but in the entire non-appearance of the product2 and the removal of the capital or tools would have precisely the same effect4 ,according to the former method1 the labourer is to be credited with the whole product1 and capital with nothing2 according to the latter method1 capital produces everything1 and labour nothing4 ,even when several labourers are employed in an establishment1 the test is inapplicable to those who are engaged upon indispensable tasks2 for example1 the engineer in the boiler room of a small factory1 and the bookkeeper in a small store4 ,remove them1 and you have no product at all2 hence a rigid enforcement of ,professor ,carver's test would award them the whole product4 ,to be sure1 we can get some measure of the productivity of these men by observing the effect on the product when inferior men are put in their places2 but this merely enables us to tell how much more they are worth than other men1 not their total worth4 ,moreover1 even the substitution test is not always practicable4 ,the attempt to ascertain the productivity of a workman of high technical skill by putting in his place an utterly unskilled labourer1 would not yield very satisfactory results1 either to the inquiry or to the industry4 ,in the majority of such cases1 the difference in the resulting product would probably far exceed the difference in the existing wage rates of the two men1 thus showing that the skilled worker is getting considerably less than he is economically worth4 ,in the field to which it is applicable1 namely1 that of more or less unspecialised labour in large establishments1 ,professor ,carver's theory violates some of the most fundamental conceptions of justice and humanity4 ,he admits that it takes no account of the labourer's efforts1 sacrifices1 or needs1 and that when unskilled labour becomes too plentiful1 the value of the product may fall below the cost of supporting a decent standard of living4 ,while he looks with some sympathy upon the demand for a minimum wage of two dollars per day1 he contends that unless the labourer really earns that amount1 some other man will be paid less than he earns1 which would be unjust4 ,to earn two dollars a day means1 in ,professor ,carver's terminology1 to add that much value to the product of the establishment in which the labourer is employed2 for this is the measure of the labourer's productivity4 ,if all the men who are now getting less than two dollars a day are receiving the full value of their product1 and if all the other workers are likewise given the full value of their product1 an increase in the remuneration of the former will mean a deduction from the compensation of the latter4 ,these conclusions of ethical pessimism are extremely vulnerable4 ,as we have shown in chapter xvi1 efforts1 sacrifices1 and needs are superior to productivity as claims to reward1 and must be given due consideration in any just scheme of distribution4 ,professor ,carver would leave them out of account entirely4 ,in the second place1 it is not always nor necessarily ever true that to raise the wages of the poorest paid labourers will mean to lower the remuneration of those who are better paid4 ,many workers1 particularly women1 are now receiving less than the measure of their productivity1 less than they earn1 less than their worth to the employer1 less than he would be willing to pay rather than go without their services4 ,professor ,carver would1 of course1 not deny that the wages of all such labourers could be raised without affecting the remuneration of other workers4 ,even when the poorest paid class is receiving all that its members are at present worth to the employer1 an increase in their compensation would not necessarily come out of the fund available for the better paid4 ,it could be deducted from excessive profits and interest2 for we know well that in many industries competition does not automatically keep down these shares to the minimum necessary to retain the services of business ability and capital4 ,it could be provided to some extent out of the enlarged product that would result from improvements in the productive process1 and from the increased efficiency of those workers whose wages had been raised4 ,finally1 the increased remuneration could be derived from increased prices4 ,when we speak of the unskilled labourer as getting all that he produces1 or all that he earns1 we refer not to his concrete product1 but to the value of that product1 to the selling price of the product4 ,neither this price1 nor any other existing price1 has anything about it that is either economically or ethically sacred4 ,in a competitive market current prices are fixed by the forces of supply and demand1 which often involve the exploitation of the weak2 in a monopoly market they are set by the desires of the monopolist1 which are likewise destitute of moral validity4 ,hence a minimum wage law which would raise the price and value of the product sufficiently to provide living wages for the unskilled workers1 thus increasing their productivity and enabling them to earn the legal wage1 would neither violate the principles of justice1 nor necessarily diminish the compensation of any other labouring group4 ,to be sure1 the increased prices might be followed by such a lessening of demand for the product as to diminish employment2 but this is another matter which has no direct bearing on either the economic or the ethical phases of productivity and earning power4 ,and the disadvantages involved in the supposition of a reduced volume of employment may possibly be not so formidable socially as those which accompany a large volume of insufficiently paid occupations4 ,this question will receive further consideration in a later chapter4 ,in the meantime1 we conclude that ,professor ,carver's theory or rule is inapplicable to a large part of the industrial field1 and that where it does apply it frequently runs counter to some of the fundamental principles of distributive justice4 ,,footnotes3 #bac ,page #dg4 #bad ,the ,chicago ,daily ,tribune1 ,july #ag1 #aiae4 #bae ,article on ,political ,economy and ,ethics1 in ,palgrave's ,dictionary of ,political ,economy4 #baf ,property and ,contract1 ,,ii1 #fjc4 #bag ,cf4 ,l',ide du ,juste ,salaire1 by ,lon ,polier1 ch4 iii4 ,paris2 #aijc4 #bah ,polier1 op4 cit41 pp4 #cc1 sq42 ,ryan1 ,a ,living ,wage1 pp4 #bf1 sq4 #bai ,ethica1 lib4 #e1 tr4 #b1 cap4 #e4 #bbj ,comment4 ad ,eth41 ,,xxi1 #agb4 #bba ,cf4 ,polier1 op4 cit41 pp4 #ff-ge2 ,ryan1 op4 cit1 pp4 #ic1 #id4 #bbb ,cf4 ,polier1 op4 cit41 pp4 #ib-ie4 #bbc ,cours d'conomie ,sociale1 pp4 #eih1 sq4 #bbd ,polier1 op4 cit41 pp4 #bai-cei2 ,menger1 ,the ,right to the ,whole ,produce of ,labour2 ,english ,translation4 ,london2 #ahii4 #bbe ,enquiry ,concerning ,political ,justice4 #bbf ,on the ,effects of ,civilisation on the ,people of ,european ,states4 #bbg ,an ,inquiry ,into the ,principles of the ,distribution of ,wealth ,most ,conducive to ,human ,happiness4 #bbh ,menger1 op4 cit41 p4 #ef4 #bbi ,op4 cit41 p4 #ea4 #bcj ,cf4 ,menger1 op4 cit41 pp4 #fb-gc4 #bca ,qu' est-ce que la proprit ou recherches sur la principe du droit et du gouvernment4 #ahdj4 #bcb ,zur ,erkentniss unserer staatswirthschaftlichen ,zustande1 #ahdb4 #bcc ,das ,kapital1 #ahfg4 #bcd ,cf4 ,polier1 op4 cit41 pp4 #ceb1 sq4 #bce ,cf4 especially chap4 xxi1 ,the ,theory of ,economic ,causation4 #bcf ,proceedings1 pp4 #bc-ed4 #bcg ,proceedings of the #bb;d ,annual ,meeting of the ,american ,economic ,association1 pp4 #afj1 #afa4 #bch ,op4 cit41 p4 #h4 #bci ,essays in ,social ,justice2 especially ch4 vii4 #bdj ,op4 cit41 pp4 #ahg1 #ahh4 #bda ,op4 cit41 p4 #bja4 ,,chapter ,,xxiii ,,the ,,minimum ,,of ,,justice3 ,a ,,living ,,wage ,although the principle of needs is somewhat prominent among the theories of wage justice1 it received only incidental mention in the last chapter4 ,considered as a comprehensive rule1 this principle has been defended with less energy and definiteness than most of the other canons4 ,considered as a partial rule1 it is sound and fundamental1 and therefore could not have been classed among theories that are unacceptable4 ,the ,principle of ,needs ,many of the early ,french ,socialists of the ,utopian school advanced this formula of distribution3 ,from each according to his powers2 to each according to his needs4 ,it was also put forward by the ,german ,socialists in the ,gotha ,program in #ahge4 ,while they have not given to this standard formal recognition in their more recent platforms1 ,socialists generally regard it as the ideal rule for the distant future4#bdb ,the difficulties confronting it are so great and so obvious that they would defer the introduction of it to a time when the operation of their system will1 they hope1 have eradicated the historical human qualities of laziness and selfishness4 ,to adopt needs as the sole rule of distribution would mean1 of course1 that each person should be rewarded in proportion to his wants and desires1 regardless of his efforts or of the amount that he had produced4 ,the mere statement of the proposal is sufficient to refute it as regards the men and women of whom we have any knowledge4 ,in addition to this objection1 there is the insuperable difficulty of measuring fairly or accurately the relative needs of any group composed of men1 women1 and children4 ,were the members' own estimates of their needs accepted by the distributing authority1 the social product would no doubt fall far short of supplying all4 ,if the measurement were made by some official person or persons1 the prospect of jobbery and tyranny opened up must give the most fanatical pause4 ,indeed1 the standard of needs should be regarded as a canon of ,communism rather than of ,socialism2 for it implies a large measure of common life as well as of common ownership1 and paternalistic supervision of consumption as well as collectivist management of production4 ,while the formula of needs must be flatly rejected as complete rule of distributive justice1 or of wage justice1 it is valid and indispensable as a partial standard4 ,it is a partial measure of justice in two senses3 first1 inasmuch as it is consistent with the admission and operation of other principles1 such as productivity and sacrifice2 second1 inasmuch as it can be restricted to certain fundamental requisites of life1 instead of being applied to all possible human needs4 ,it can be made to safeguard the minimum demands of reasonable life1 and therefore to function as a minimum standard of wage justice4 ,human needs constitute the primary title or claim to material goods4 ,none of the other recognised titles1 such as productivity1 effort1 sacrifice1 purchase1 gift1 inheritance1 or first occupancy1 is a fundamental reason or justification of either rewards or possessions4 ,they all assume the existence of needs as a prerequisite to their validity4 ,if men did not need goods they could not reasonably lay claim to them by any of the specific titles just enumerated4 ,first comes the general claim or fact of needs2 then the particular title or method by which the needs may be conveniently supplied4 ,while these statements may seem elementary and platitudinous1 their practical value will be quite evident when we come to consider the conflicting claims that sometimes arise out of the clash between needs and some of the other titles4 ,we shall see that needs are not merely a physical reason or impulse toward acquisition and possession1 but a moral title which rationalises the claim to a certain amount of goods4#bdc ,three ,fundamental ,principles ,the validity of needs as a partial rule of wage justice rests ultimately upon three fundamental principles regarding man's position in the universe4 ,the first is that ,god created the earth for the sustenance of all ,his children2 therefore1 that all persons are equal in their inherent claims upon the bounty of nature4 ,as it is impossible to demonstrate that any class of persons is less important than another in the eyes of ,god1 it is logically impossible for any believer in ,divine ,providence to reject this proposition4 ,the man who denies ,god or ,providence can refuse assent to the second part of the proposition only by refusing to acknowledge the personal dignity of the human individual1 and the equal dignity of all persons4 ,inasmuch as the human person is intrinsically sacred and morally independent1 he is endowed with those inherent prerogatives1 immunities1 and claims that we call rights4 ,every person is an end in himself2 none is a mere instrument to the convenience or welfare of any other human being4 ,the worth of a person is something intrinsic1 derived from within1 not determined or measurable by reference to any earthly object or purpose without4 ,in this respect the human being differs infinitely from1 is infinitely superior to1 a stone1 a rose1 or a horse4 ,while these statements help to illustrate what is meant by the dignity of personality1 by the intrinsic worth1 importance1 sacredness of the human being1 they do not prove the existence of this inherent juridical quality4 ,proof in the strict sense is irrelevant and impossible4 ,if the intrinsic and equal moral worth of all persons be not self evident to a man1 it will not approve itself to him through any process of argumentation4 ,whosoever denies it can also logically deny men's equal claims of access to the bounty of the earth2 but he cannot escape the alternative conclusion that brute force1 exercised either by the ,state or by individuals1 is the only proper determinant of possessions and of property4 ,against this monstrous contention it is not worth while to offer a formal argument4 ,the second fundamental principle is that the inherent right of access to the earth is conditioned upon1 and becomes actually valid through1 the expenditure of useful labour4 ,generally speaking the fruits and potentialities of the earth do not become available to men without previous exertion4 ,in the sweat of thy brow thou shalt eat thy bread1 is a physical no less than a moral commandment4 ,there are1 indeed1 exceptions3 the very young1 the infirm1 and the possessors of a sufficient amount of property4 ,the two former classes have claims to a livelihood through piety and charity1 while the third group has at least a presumptive claim of justice to rent and interest1 and a certain claim of justice to the money value of their goods4 ,nevertheless1 the general condition is that men must work in order to live4 ,if a man will not work neither shall he eat4 ,for those who refuse to comply with this condition the inherent right of access to the earth remains only hypothetical and suspended4 ,the two foregoing principles involve as a corollary a third principle2 the men who are in present control of the opportunities of the earth are obliged to permit reasonable access to these opportunities by persons who are willing to work4 ,in other words1 possessors must so administer the common bounty of nature that non-owners will not find it unreasonably difficult to get a livelihood4 ,to put it still in other terms1 the right to subsist from the earth implies the right to access thereto on reasonable terms4 ,when any man who is willing to work is denied the exercise of this right1 he is no longer treated as the moral and juridical equal of his fellows4 ,he is regarded as inherently inferior to them1 as a mere instrument to their convenience2 and those who exclude him are virtually taking the position that their rights to the common gifts of the ,creator are inherently superior to his birthright4 ,obviously this position cannot be defended on grounds of reason4 ,possessors are no more justified in excluding a man from reasonable access to the goods of the earth than they would be in depriving him of the liberty to move from place to place4 ,the community that should arbitrarily shut a man up in prison would not violate his rights more fundamentally than the community or the proprietors who should shut him out from the opportunity of getting a livelihood from the bounty of the earth4 ,in both cases the man demands and has a right to a common gift of ,god4 ,his moral claim is as valid to the one good as to the other1 and it is as valid to both goods as is the claim of any of his fellows4 ,the ,right to a ,decent ,livelihood ,every man who is willing to work has1 therefore1 an inborn right to sustenance from the earth on reasonable terms or conditions4 ,this cannot mean that all persons have a right to equal amounts of sustenance or income2 for we have seen on a preceding page that men's needs1 the primary title to property1 are not equal1 and that other canons and factors of distribution have to be allowed some weight in determining the division of goods and opportunities4 ,nevertheless1 there is a certain minimum of goods to which every worker is entitled by reason of his inherent right of access to the earth4 ,he has a right to at least a decent livelihood4 ,that is2 he has a right to so much of the requisites of sustenance as will enable him to live in a manner worthy of a human being4 ,the elements of a decent livelihood may be summarily described as3 food1 clothing1 and housing sufficient in quantity and quality to maintain the worker in normal health1 in elementary comfort1 and in an environment suitable to the protection of morality and religion2 sufficient provision for the future to bring elementary contentment1 and security against sickness1 accident1 and invalidity2 and sufficient opportunities of recreation1 social intercourse1 education1 and church-membership to conserve health and strength1 and to render possible in some degree the exercise of the higher faculties4 ,on what ground is it contended that a worker has a right to a decent livelihood1 as thus defined1 rather than to a bare subsistence8 ,on the same ground that validates his right to life1 marriage1 or any of the other fundamental goods of human existence4 ,on the dignity of personality4 ,why is it wrong and unjust to kill or maim an innocent man8 ,because human life and the human person possess intrinsic worth2 because personality is sacred4 ,but the intrinsic worth and sacredness of personality imply something more than security of life and limb1 and the material means of bare existence4 ,the man who is not provided with the requisites of normal health1 efficiency1 and contentment lives a maimed life1 not a reasonable life4 ,his physical condition is not worthy of a human being4 ,furthermore1 man's personal dignity demands not merely the conditions of reasonable physical existence1 but the opportunity of pursuing self perfection through the harmonious development of all his faculties4 ,unlike the brutes1 he is endowed with a rational soul1 and the capacity of indefinite self improvement4 ,a due regard to these endowments requires that man shall have the opportunity of becoming not only physically stronger1 but intellectually wiser1 morally better1 and spiritually nearer to ,god4 ,if he is deprived of these opportunities he cannot realise the potentialities of his nature nor attain the divinely appointed end of his nature4 ,he remains on the plane of the lower animals4 ,his personality is violated quite as fundamentally as when his body is injured or his life destroyed4 ,while it is impossible to define with mathematical precision the degree of personal development that is necessary to satisfy the claims of personal dignity1 it is entirely practicable to state with sufficient definiteness the minimum conditions of such development4 ,they are that quantity of goods and opportunities which fair-minded men would regard as indispensable to humane1 efficient1 and reasonable life4 ,the summary description of a decent livelihood at the end of the second last paragraph1 would probably be accepted by all men who really believe in the intrinsic worth of personality4 ,the ,claim to a ,decent ,livelihood from a ,present ,occupation ,the claim of a worker to a decent livelihood from the goods of the earth does not always imply a strict right to a livelihood from one's present occupation4 ,to demand this would in some circumstances be to demand a livelihood not on reasonable but on unreasonable terms2 for the persons in control of the sources could not reasonably be required to provide a decent livelihood4 ,their failure to do so would not constitute an unreasonable hindrance to the worker's access to the earth in such circumstances4 ,in chapter xvi we saw that not all business men have a strict right to that minimum of profits which is required to yield them a decent livelihood3 first1 because the direction of industry is not generally the business man's only means of getting a living2 second1 because the community1 the consumers1 do not regard the presence and activity of all existing business men as indispensable4 ,of course1 the community is morally bound to pay such prices for goods as will enable all the necessary business men1 whether manufacturers or traders1 to obtain a decent livelihood in return for their directive functions2 but it is not obliged to provide a livelihood for those business men whose presence is not required1 who could vanish from the field of industrial direction without affecting either the supply or the price of goods1 and whose superfluous character is proved by the fact that they cannot make a livelihood at the prevailing prices4 ,they are in the position of persons whom the community does not desire to employ as business men4 ,in refusing to pay prices sufficiently high to provide these inefficient business men with a decent livelihood1 the community is not unreasonably hindering their access to the common goods of the earth4 ,such men are really demanding a livelihood on unreasonable terms4 ,the ,labourer's ,right to a ,living ,wage ,on the other hand1 the wage earner's claim to a decent livelihood is valid1 generally speaking1 in his present occupation4 ,in other words1 his right to a decent livelihood in the abstract means in the concrete a right to a living wage4 ,to present the matter in its simplest terms1 let us consider first the adult male labourer of average physical and mental ability who is charged with the support of no one but himself1 and let us assume that the industrial resources are adequate to such a wage for all the members of his class4 ,those who are in control of the resources of the community are morally bound to give such a labourer a living wage4 ,if they fail to do so they are unreasonably hindering his access to a livelihood on reasonable terms2 and his right to a livelihood on reasonable terms is violated4 ,the central consideration here is evidently the reasonableness of the process4 ,unlike the business man1 the rent receiver1 and the interest receiver1 the labourer has ordinarily no other means of livelihood than his wages4 ,if these do not furnish him with a decent subsistence he is deprived of a decent subsistence4 ,when he has performed an average day's work1 he has done all that is within his power to make good his claim to a decent livelihood4 ,on the other hand1 the community is the beneficiary of his labour1 and desires his services4 ,if1 indeed1 the community would rather do without the services of an individual labourer than pay him a living wage1 it is morally free to choose the former alternative1 precisely as it is justified in refusing to pay a price for groceries that will enable an inefficient grocer to obtain living profits4 ,whatever concrete form the right of such persons to a decent livelihood may take1 it is not the right to living wages or living profits from the occupations in question4 ,here1 however1 we are discussing the labourer to whom the community would rather pay a living wage than not employ him at all4 ,to refuse such a one a living wage merely because he can be constrained by economic pressure to work for less1 is to treat him unreasonably1 is to deprive him of access to a livelihood on reasonable terms4 ,such treatment regards the labourer as inferior to his fellows in personal worth1 as a mere instrument to their convenience4 ,it is an unreasonable distribution of the goods and opportunities of the earth4 ,obviously there is no formula by which such conduct can be mathematically demonstrated as unreasonable2 but the proposition is as certain morally as any other proposition that is susceptible of rational defence in the field of distribution4 ,no man who accepts the three fundamental principles stated some pages back1 can deny the right of the labourer to a living wage4 ,the man who does not accept them must hold that all property rights are the arbitrary creation of the ,state1 or that there is no such thing as a moral right to material goods4 ,in either supposition the distribution and possession of the earth's bounty are subject entirely to the arbitrament of might4 ,there is nothing to be gained by a formal criticism of this assumption4 ,what persons1 or group1 or authority is charged with the obligation which corresponds to the right to a living wage8 ,we have referred to the community in this connection1 but we do not mean the community in its corporate capacity1 i4e41 the ,state4 ,as regards private employments1 the ,state is not obliged to pay a living wage1 nor any other kind of wage1 since it has not assumed the wage-paying function with respect to these labourers4 ,as protector of natural rights1 and as the fundamental determiner of industrial institutions1 the ,state is obliged to enact laws which will enable the labourer to obtain a living wage2 but the duty of actually providing this measure of remuneration rests upon that class which has assumed the wage-paying function4 ,this is the employers4 ,in our present industrial system1 the employer is society's paymaster4 ,he1 not the ,state1 receives the product out of which all the agents of production must be rewarded4 ,where the labourer is engaged in rendering personal services to his employer1 the latter is the only beneficiary of the labourer's activity4 ,in either case the employer is the only person upon whom the obligation of paying a living wage can primarily fall4 ,if the ,state were in receipt of the product of industry1 the wage-paying fund1 it would naturally be charged with the obligation that now rests immediately upon the employer4 ,if any other class in the community were the owners of the product that class would be under this specific obligation4 ,as things are1 the employer is in possession of the product1 and discharges the function of wage payer2 consequently he is the person who is required to perform this function in a reasonable manner4 ,when the ,employer ,is ,unable to ,pay a ,living ,wage ,evidently the employer who cannot pay a living wage is not obliged to do so1 since moral duties suppose a corresponding physical capacity4 ,in such circumstances the labourer's right to a living wage becomes suspended and hypothetical1 just as the claim of a creditor when the debtor becomes insolvent4 ,let us see1 however1 precisely what meaning should reasonably be given to the phrase1 inability to pay a living wage4 ,an employer is not obliged to pay a full living wage to all his employs so long as that action would deprive himself and his family of a decent livelihood4 ,as active director of a business1 the employer has quite as good a right as the labourer to a decent livelihood from the product1 and in case of conflict between the two rights1 the employer may take advantage of that principle of charity which permits a man to prefer himself to his neighbour1 when the choice refers to goods of the same order of importance4 ,moreover1 the employer is justified in taking from the product sufficient to support a somewhat higher scale of living than generally prevails among his employs2 for he has become accustomed to this higher standard1 and would suffer a considerable hardship if compelled to fall notably below it4 ,it is reasonable1 therefore1 that he should have the means of maintaining himself and family in moderate conformity with their customary standard of living2 but it is unreasonable that they should indulge in anything like luxurious expenditure1 so long as any of the employs fail to receive living wages4 ,suppose that an employer cannot pay all his employs living wages and at the same time provide the normal rate of interest on the capital in the business4 ,so far as the borrowed capital is concerned1 the business man has no choice2 he must pay the stipulated rate of interest1 even though it prevents him from giving a living wage to all his employs4 ,nor can it be reasonably contended that the loan capitalist in that case is obliged to forego the interest due him4 ,he cannot be certain that this interest payment1 or any part of it1 is really necessary to make up what is wanting to a complete scale of living wages4 ,the employer would be under great temptation to defraud the loan capitalist on the pretext of doing justice to the labourer1 or to conduct his business inefficiently at the expense of the loan capitalist4 ,anyhow1 the latter is under no obligation to leave his money in a concern that is unable to pay him interest regularly4 ,the general rule1 then1 would seem to be that the loan capitalist is not obliged to refrain from taking interest in order that the employs may have living wages4 ,is the employer justified in withholding the full living wage from his employs to provide himself with the normal rate of interest on the capital that he has invested in the enterprise8 ,speaking generally1 he is not4 ,in the first place1 the right to any interest at all1 except as a return for genuine sacrifices in saving1 is not certain but only presumptive4#bdd ,consequently it has no such firm and definite basis as the right to a living wage4 ,in the second place1 the right to interest1 be it ever so definite and certain1 is greatly inferior in force and urgency4 ,it is an axiom of ethics that when two rights conflict1 the less important must give way to the more important4 ,since all property rights are but means to the satisfaction of human needs1 their relative importance is determined by the relative importance of the ends that they serve2 that is1 by the relative importance of the dependent needs4 ,now the needs that are supplied through interest on the employer's capital are slight and not essential to his welfare2 the needs that are supplied through a living wage are essential to a reasonable life for the labourer4 ,on the assumption that the employer has already taken from the product sufficient to provide a decent livelihood1 interest on his capital will be expended for luxuries or converted into new investments2 a living wage for the labourer will all be required for the fundamental goods of life1 physical1 mental1 or moral4 ,evidently1 then1 the right to interest is inferior to the right to a living wage4 ,to proceed on the contrary theory is to reverse the order of nature and reason1 and to subordinate essential needs and welfare to unessential needs and welfare4 ,nor can it be maintained that the capitalist-employer's claim to interest is a claim upon the product prior to and independent of the claim of the labourer to a living wage4 ,that would be begging the question4 ,the product is in a fundamental sense the common property of employer and employs4 ,both parties have co-operated in turning it out1 and they have equal claims upon it1 in so far as it is necessary to yield them a decent livelihood4 ,having taken therefrom the requisites of a decent livelihood for himself1 the employer who appropriates interest at the expense of a decent livelihood for his employs1 in effect treats their claims upon the common and joint product as essentially inferior to his own4 ,if this assumption were correct it would mean that the primary and essential needs of the employs are of less intrinsic importance than the superficial needs of the employer1 and that the employs themselves are a lower order of being than the employer4 ,the incontestable fact is that such an employer deprives the labourers of access to the goods of the earth on reasonable terms1 and gives himself an access thereto that is unreasonable4 ,suppose that all employers who found themselves unable to pay full living wages and obtain the normal rate of interest1 should dispose of their businesses and become mere loan capitalists1 would the condition of the underpaid workers be improved8 ,two effects would be certain3 an increase in the supply of loan capital relatively to the demand1 and a decrease in the number of active business men4 ,the first would probably lead to a decline in the rate of interest1 while the second might or might not result in a diminution of the volume of products4 ,if the rate of interest were lowered the employing business men would be able to raise wages2 if the prices of products rose a further increase of wages would become possible4 ,however1 it is not certain that prices would rise2 for the business men who remained would be the more efficient in their respective classes1 and might well be capable of producing all the goods that had been previously supplied by their eliminated competitors4 ,owing to their superior efficiency and their larger output1 the existing business men would be able to pay considerably higher wages than those who had disappeared from the field of industrial direction4 ,as things are to-day1 it is the less efficient business men who are unable to pay living wages and at the same time obtain the prevailing rate of interest on their capital4 ,the ultimate result1 therefore1 of the withdrawal from business of those who could not pay a living wage1 would probably be the universal establishment of a living wage4 ,of course1 this supposition is purely fanciful4 ,only a small minority of the business men of to-day are likely to be driven by their consciences either to pay a living wage at the cost of interest on their capital1 or to withdraw from business when they are confronted with such a situation4 ,is this small minority under moral obligation to adopt either of these alternatives1 when the effect of such action upon the great mass of the underpaid workers is likely to be very slight8 ,the question would seem to demand an answer in the affirmative4 ,those employers who paid a living wage at the expense of interest would confer a concrete benefit of great value upon a group of human beings4 ,those who shrank from this sacrifice1 and preferred to go out of business1 would at least have ceased to co-operate in an unjust distribution of wealth1 and their example would not be entirely without effect upon the views of their fellow employers4 ,an ,objection and ,some ,difficulties ,against the foregoing argument it may be objected that the employer does his full duty when he pays the labourer the full value of the product or service4 ,labour is a commodity of which wages are the price2 and the price is just if it is the fair equivalent of the labour4 ,like any other onerous contract1 the sale of labour is governed by the requirements of commutative justice2 and these are satisfied when labour is sold for its moral equivalent4 ,what the employer is interested in and pays for1 is the labourer's activity4 ,there is no reason why he should take into account such an extrinsic consideration as the labourer's livelihood4 ,most of these assertions are correct1 platitudinously correct1 but they yield us no specific guidance because they use language vaguely and even ambiguously4 ,the contention underlying them was adequately refuted in the last chapter1 under the heads of theories of value and theories of exchange equivalence4 ,at present it will be sufficient to repeat summarily the following points3 if the value of labour is to be understood in a purely economic sense it means market value1 which is obviously not a universal measure of justice2 if by the value of labour we mean its ethical value we cannot determine it in any particular case merely by comparing labour and compensation2 we are compelled to have recourse to some extrinsic ethical principle2 such an extrinsic principle is found in the proposition that the personal dignity of the labourer entitles him to a wage adequate to a decent livelihood2 therefore1 the ethical value of labour is always equivalent to at least a living wage1 and the employer is morally bound to give this much remuneration4 ,moreover1 the habit of looking at the wage contract as a matter of commutative justice in the mere sense of contractual justice1 is radically defective4 ,the transaction between employ and employer involves other questions of justice than that which arises immediately out of the relation between the things exchanged4 ,when a borrower repays a loan of ten dollars1 he fulfils the obligation of justice because he returns the full equivalent of the article that he received4 ,nothing else is pertinent to the question of justice in this transaction4 ,neither the wealth nor the poverty1 the goodness nor the badness1 nor any other quality of either lender or borrower1 has a bearing on the justice of the act of repayment4 ,in the wage contract1 and in every other contract that involves the distribution of the common bounty of nature1 or of the social product1 the juridical situation is vitally different from the transaction that we have just considered4 ,the employer has obligations of justice1 not merely as the receiver of a valuable thing through an onerous contract1 but as the distributor of the common heritage of nature4 ,his duty is not merely contractual1 but social4 ,he fulfils not only an individual contract1 but a social function4 ,unless he performs this social and distributive function in accordance with justice1 he does not adequately discharge the obligation of the wage contract4 ,for the product out of which he pays wages is not his in the same sense as the personal income out of which he repays a loan4 ,his claim upon the product is subject to the obligation of just distribution2 the obligation of so distributing the product that the labourers who have contributed to the product shall not be denied their right to a decent livelihood on reasonable terms from the bounty of the earth4 ,on the other hand1 the activity of the labourer is not a mere commodity1 as money or pork2 it is the output of a person1 and a person who has no other means of realising his inherent right to a livelihood4 ,consequently1 both terms of the contract1 the labour and the compensation1 involve other elements of justice than that which arises out of their assumed mutual equivalence4 ,in a word1 justice requires the employer not merely to give an equivalent for labour 7an equivalent which is determined by some arbitrary1 conventional1 fantastic1 or impossible attempt to compare work and pay7 but to fulfil his obligation of justly distributing that part of the common bounty of the earth which comes into his hands by virtue of his social function in the industrial process4 ,how futile1 then1 to endeavour by word juggling to describe the employer's obligation in terms of mere equivalence and contractual justice6 ,some difficulties occur in connection with the wage rights of adult males whose ability is below the average1 and female and child workers4 ,since the dignity and the needs of personality constitute the moral basis of the claim to a decent livelihood1 it would seem that the inefficient worker who does his best is entitled to a living wage4 ,undoubtedly he has such a right if it can be effectuated in the existing industrial organisation4 ,as already noted1 the right of the workman of average ability to a living wage does not become actual until he finds an employer who would rather give him that much pay than do without his services4 ,since the obligation of paying a living wage is not an obligation to employ any particular worker1 an employer may refrain from hiring or may discharge any labourer who does not add to the product sufficient value to provide his wages4 ,for the employer cannot reasonably be expected to employ any one at a positive loss to himself4 ,whence it follows that he may pay less than living wages to any worker whose services he would rather dispense with than remunerate at that figure4#bde ,women and young persons who regularly perform a full day's work1 have a right to compensation adequate to a decent livelihood4 ,in the case of minors1 this means living at home1 since this is the normal condition of all1 and the actual condition of almost all4 ,adult females have a right to a wage sufficient to maintain them away from home1 because a considerable proportion of them live in this condition4 ,if employers were morally free to pay home-dwelling women less than those adrift1 they would endeavour to employ only the former4 ,this would create a very undesirable social situation4 ,the number of women away from home who are forced to earn their own living is sufficiently large 7#bj to #be per cent4 of the whole7 to make it reasonable that for their sakes the wage of all working women should be determined by the cost of living outside the parental precincts4 ,this is one of the social obligations that reasonably falls upon the employer on account of his function in the present industrial system4 ,in all the ,american minimum wage laws1 the standard of payment is determined by the cost of living away from home4 ,besides1 the difference between the living costs of women in the two conditions is not nearly as great as is commonly assumed4 ,probably it never amounts to a dollar a week4 ,the ,family ,living ,wage ,up to the present we have been considering the right of the labourer to a wage adequate to a decent livelihood for himself as an individual4 ,in the case of an adult male1 however1 this is not sufficient for normal life1 nor for the reasonable development of personality4 ,the great majority of men cannot live well balanced lives1 cannot attain a reasonable degree of self development outside the married state4 ,therefore1 family life is among the essential needs of a normal and reasonable existence4 ,it is not1 indeed1 so vitally necessary as the primary requisites of individual life1 such as food1 clothing1 and shelter1 but it is second only to these4 ,outside the family man cannot1 as a rule1 command that degree of contentment1 moral strength1 and moral safety which are necessary for reasonable and efficient living4 ,it is unnecessary to labour this point further1 as very few would assert that the average man can live a normal and complete human life without marriage4 ,now1 the support of the family falls properly upon the husband and father1 not upon the wife and mother4 ,the obligation of the father to provide a livelihood for the wife and young children is quite as definite as his obligation to maintain himself4 ,if he has not the means to discharge this obligation he is not justified in getting married4 ,yet1 as we have just seen1 marriage is essential to normal life for the great majority of men4 ,therefore1 the material requisites of normal life for the average adult male1 include provision for his family4 ,in other words1 his decent livelihood means a family livelihood4 ,consequently1 he has a right to obtain such a livelihood on reasonable terms from the bounty of the earth4 ,in the case of the wage earner1 this right can be effectuated only through wages2 therefore1 the adult male labourer has a right to a family living wage4 ,if he does not get this measure of remuneration his personal dignity is violated1 and he is deprived of access to the goods of the earth1 quite as certainly as when his wage is inadequate to personal maintenance4 ,the difference between family needs and personal needs is a difference only of degree4 ,the satisfaction of both is indispensable to his reasonable life4 ,just as the woman worker who lives with her parents has a right to a wage sufficient to maintain her away from home1 so the unmarried adult male has a right to a family living wage4 ,if only married men get the latter wage they will be discriminated against in the matter of employment4 ,to prevent this obviously undesirable condition1 it is necessary that a family living wage be recognised as the right of all adult male workers4 ,no other arrangement is reasonable in our present industrial system4 ,in a competitive rgime the standard wage for both the married and the unmarried men is necessarily the same4 ,it will be determined by the living costs of either the one class or the other4 ,at present the wage of the unskilled is unfortunately adjusted to the subsistence cost of the man who is not married4 ,since two prevailing scales of wages are impossible1 the remuneration of the unmarried must in the interests of justice to the married be raised to the living costs of the latter4 ,moreover1 the unmarried labourer needs more than an individual living wage in order to save sufficient money to enter upon the responsibilities of matrimony4 ,only two objections of any importance can be brought against the male labourer's claim to a family living wage4 ,the first is that just wages are to be measured by the value of the labour performed1 and not by such an extrinsic consideration as the needs of a family4 ,it has already been answered in this and the preceding chapters4 ,not the economic but the ethical value of the service rendered1 is the proper determinant of justice in the matter of wages2 and this ethical value is always the equivalent of at least a decent livelihood for the labourer and his family4 ,according to the second objection1 the members of the labourer's family have no claim upon the employer1 since they do not participate in the work that is remunerated4 ,this contention is valid1 but it is also irrelevant4 ,the claim of the labourer's family to sustenance is directly upon him1 not upon his employer2 but the labourer has a just claim upon the employer for the means of meeting the claims of his family4 ,his right to this amount of remuneration is directly based neither upon the needs nor the rights of his family1 but upon his own needs1 upon the fact that family conditions are indispensable to his own normal life4 ,if the wife and young children were self supporting1 or were maintained by the ,state1 the wage rights of the father would not include provision for the family4 ,since1 however1 family life involves support by the father1 the labourer's right to such a life necessarily includes the right to a wage adequate to family support4 ,other ,arguments in ,favour of a ,living ,wage ,thus far1 the argument has been based upon individual natural rights4 ,if we give up the doctrine of natural rights1 and assume that all the rights of the individual come to him from the ,state1 we must admit that the ,state has the power to withhold and withdraw all rights from any and all persons4 ,its grant of rights will be determined solely by considerations of social utility4 ,in the concrete this means that some citizens may be regarded as essentially inferior to other citizens1 that some may properly be treated as mere instruments to the convenience of others4 ,or it means that all citizens may be completely subordinated to the aggrandisement of an abstract entity1 called the ,state4 ,neither of these positions is logically defensible4 ,no group of persons has less intrinsic worth than another2 and the ,state has no rational significance apart from its component individuals4 ,nevertheless1 a valid argument for the living wage can be set up on grounds of social welfare4 ,a careful and comprehensive examination of the evil consequences to society and the ,state from the under-payment of any group of labourers1 would show that a universal living wage is the only sound social policy4 ,among competent social students1 this proposition has become a commonplace4 ,it will not be denied by any intelligent person who considers seriously the influence of low wages in diminishing the efficiency1 physical1 mental1 and moral1 of the workers2 in increasing the volume of crime1 and the social cost of meeting it2 in the immense social outlay for the relief of unnecessary poverty1 sickness1 and other forms of distress2 and in the formation of a large and discontented proletariat4#bdf ,the living wage doctrine also receives strong support from various kinds of authority4 ,of these the most important and best known is the famous encyclical1 ,on the ,condition of ,labour1 ,may #ae1 #ahia1 by ,pope ,leo ,,xiii4 ,let it then be granted that workman and employer should1 as a rule1 make free agreements1 and in particular should agree freely as to wages2 nevertheless1 there is a dictate of natural justice more imperious and ancient than any bargain between man and man2 namely1 that the remuneration should be sufficient to maintain the wage earner and reasonable and frugal comfort4 ,although the ,pope refrained from specifying whether the living wage that he had in mind was one adequate merely to an individual livelihood1 or sufficient to support a family1 other passages in the ,encyclical leave no room for doubt that he regarded the latter as the normal and equitable measure of remuneration4 ,within a dozen lines of the sentence quoted above1 he made this statement3 ,if the workman's wages be sufficient to maintain himself1 his wife1 and his children in reasonable comfort1 he will not find it difficult1 if he be a sensible man1 to practise thrift2 and he will not fail1 by cutting down expenses1 to put by some little savings and thus secure a small income4 ,all lesser ,catholic authorities hold that the adult male labourer has some kind of moral claim to a family living wage4 ,in all probability the majority of them regard this claim as one of strict justice1 while the minority would put it under the head of legal justice1 or natural equity1 or charity4 ,the differences between their views are not as important as the agreements2 for all the ,catholic writers maintain that the worker's claim is strictly moral in its nature1 and that the corresponding obligation upon the employer is likewise of a moral character4 ,the ,federal ,council of the ,churches of ,christ in ,america1 representing the principal ,protestant denominations1 has formally declared in favour of a living wage as a minimum in every industry4 ,public opinion likewise accepts the principle of a living wage as the irreducible minimum of fair treatment for all workers4 ,indeed1 it would be difficult to find any important person in any walk of life to-day who would have the temerity to deny that the labourer is entitled to a wage sufficient for reasonable family life4 ,among employers the opinion is fairly general that the narrow margin of profit in competitive industries renders the burden of paying a family living wage to all adult males unfairly heavy2 but the assertion that the wage contract is merely an economic transaction1 having no relation to justice1 is scarcely ever uttered publicly4 ,the ,money ,measure of a ,living ,wage ,for self-supporting women a living wage is not less than eight dollars per week in any city of the ,united ,states1 and in some of our larger cities it is from one to two dollars above this figure4 ,the state minimum wage commissions that have acted in the matter1 have fixed the rates not lower than eight nor higher than ten dollars per week4#bdg ,these determinations are in substantial agreement with a large number of other estimates1 both official and unofficial4 ,when the present writer was making an estimate of the cost of decent living for a family about eleven years ago1 he came to the conclusion that six hundred dollars per year was the lowest amount that would maintain a man and wife and four or five small children in any ,american city1 and that this sum was insufficient in some of the larger cities4#bdh ,since that time retail prices seem to have risen at least twenty-five and possibly forty-five per cent4#bdi ,if the six hundred dollar minimum were correct in #aije it should1 therefore1 be increased to seven hundred and fifty dollars to meet the present range of prices4 ,that this estimate is too low for some of the more populous cities1 has been fully proved by several recent investigations4 ,in #aiae the ,bureau of ,standards put the minimum cost of living for a family of five in ,new ,york ,city at #hdj4ah4 ,about the same time the ,new ,york ,factory ,investigating ,commission gave the estimate of #hgf4dc for ,new ,york ,city1 and #ggb4dc for ,buffalo4 ,in #aijh1 when the cost of living was from ten to thirty per cent4 cheaper than to-day1 the ,united ,states ,bureau of ,labour found that1 according to the customs prevailing in the communities selected for study1 a fair standard of living for a family of five persons among mill workers1 was #fjj4gd in the ,south1 and from #fij4fj to #gca4fd in ,fall ,river1 ,massachusetts4#bej ,according to the ,manly ,report of the ,federal ,commission on ,industrial ,relations1 between two-thirds and three-fourths of the adult male labourers of the ,united ,states receive less than #gej4jj a year1 and the same proportion of women workers are paid under eight dollars a week4 ,a considerable majority1 therefore1 of both male and female labourers fail to obtain living wages4 ,we are still very far from having actualised even the minimum measure of wage justice4 ,,footnotes3 #bdb ,cf4 ,skelton1 ,socialism3 ,a ,critical ,analysis1 p4 #bjb2 ,menger1 ,the ,right to the ,whole ,produce of ,labour1 pp4 #h1 sq4 #bdc ,all the questions treated in this chapter are discussed at much greater length in the author's work1 ,a ,living ,wage2 ,macmillan2 #aijf4 #bdd ,see chapters xii and xiii4 #bde ,while the statement in the text applies to all labourers of less than average ability1 it obviously is applicable only to individual cases among those who are up to the average4 ,these are the workers at the margin of the labour force in an establishment1 those who could be discharged without causing the industry to shut down4 ,if an employer would rather go out of business than pay a living wage to all his necessary labourers of average ability1 he is morally free to do so2 but he may not employ them at less than living wages in order to obtain interest on his capital4 #bdf ,one of the best statements of the evil social results of low wages will be found in ,webb's ,industrial ,democracy1 vol4 ,,ii1 pp4 #gdi-gff4 #bdg ,see reports of these commissions in ,oregon1 ,washington1 ,massachusetts1 ,minnesota1 and ,california4 #bdh ,a ,living ,wage1 p4 #aej4 #bdi ,see ,bulletins of the ,federal ,bureau of ,labour ,statistics on ,retail ,prices2 and ,nearing1 ,reducing the ,cost of ,living4 #bej ,summary of the ,report on ,condition of ,woman and ,child ,wage ,earners in the ,united ,states1 pp4 #chc1 #chd4 ,the best intensive study of family cost of living is that published in the volume edited by ,robert ,c4 ,chapin1 ,the ,standard of ,living ,among ,workingmen's ,families in ,new ,york ,city2 #aiji4 ,it led to the conclusion that anything less than eight hundred dollars was insufficient for the yearly maintenance of a husband and wife and three small children in ,manhattan4 ,,chapter ,,xxiv ,,the ,,problem ,,of ,,complete ,,wage ,,justice ,a living wage for all workers is merely the minimum measure of just remuneration4 ,it is not in every case complete justice4 ,possibly it is not the full measure of justice in any case4 ,how much more than a living wage is due to any or all of the various classes of labourers8 ,how much more may any group of workers demand without exposing itself to the sin of extortion8 ,by what principles shall these questions be answered8 ,the problem of complete wage justice can be conveniently and logically considered in four distinct relations1 as regards3 the respective claims of the different classes of labourers to a given amount of money available for wage payments2 the claims of the whole body of labourers1 or any group thereof1 to higher wages at the expense of profits2 at the expense of interest2 and at the expense of the consumer4 ,comparative ,claims of ,different ,labour ,groups ,in the division of a common wage fund1 no section of the workers is entitled to anything in excess of living wages until all the other sections have received that amount of remuneration4 ,the need of a decent livelihood constitutes a more urgent claim than any other that can be brought forward4 ,neither efforts1 nor sacrifices1 nor productivity1 nor scarcity can justify the payment of more than living wages to any group1 so long as any other group in the industry remains below that level2 for the extra compensation will supply the nonessential needs of the former by denying the essential needs of the latter4 ,the two groups of men will be treated unequally in respect of those qualities in which they are equal2 namely1 their personal dignity and their claims to the minimum requisites of reasonable life and self development4 ,this is a violation of justice4 ,let us suppose that all the workers among whom a given amount of compensation is to be distributed1 have already received living wages1 and that there remains a considerable surplus4 ,on what principles should the surplus be apportioned8 ,for answer we turn to the canons of distribution1 as explained in chapter xvi4 ,when the elementary needs of life and development have been supplied1 the next consideration might seem to be the higher or nonessential needs and capacities4 ,proportional justice would seem to suggest that the surplus ought to be distributed in accordance with the varying needs and capacities of men to develop their faculties beyond the minimum reasonable degree4 ,as we have already pointed out1 this would undoubtedly be the proper rule if it were susceptible of anything like accurate application1 and if the sum to be distributed were not produced by and dependent upon those who were to participate in the distribution4 ,however1 we know that the first condition is impracticable1 while the second is non-existent4 ,inasmuch as the sharers in the distribution have produced and constantly determine the amount to be apportioned1 the distributive process must disregard nonessential needs1 and govern itself by other canons of justice4 ,the most urgent of these is the canon of efforts and sacrifices4 ,superior effort1 as measured by unusual will-exertion1 is a fundamental rule of justice1 and a valid title to exceptional reward4 ,men who strive harder than the majority of their fellows are ethically deserving of extra compensation4 ,at least1 this is the pure theory of the matter4 ,in practice1 the situation is complicated by the fact that unusual effort cannot always be distinguished1 and by the further fact that some exceptional efforts do not fructify in correspondingly useful results4 ,among men engaged at the same kind of work1 superior effort is to a great extent discernible in the unusually large product4 ,as such it actually receives an extra reward in accordance with the canon of productivity4 ,when men are employed at different tasks1 unusual efforts cannot generally be distinguished and compensated4 ,hence the general principle is that superior efforts put forth in the production of utilities1 entitle men to something more than living wages1 but that the enforcement of this principle is considerably hindered by the difficulty of discerning such efforts4 ,the unusual sacrifices that deserve extra compensation are connected with the costs of industrial functions and the disagreeable character of occupations4 ,under the first head are included the expense of industrial training and the debilitating effects of the work4 ,not only justice to the worker but a farsighted view of social welfare1 dictate that all unusual costs of preparation for an industrial craft or profession should be repaid in the form of unusual compensation4 ,this means something more than a living wage4 ,for the same reasons the unusual hazards and disability resulting from industrial accidents and diseases should be provided for by higher remuneration4 ,in the absence of such provision1 these costs will have to be borne by parents1 by society in the form of charitable relief1 or by the worker himself through unnecessary suffering and incapacity4 ,the industry that does not provide for all these costs is a social parasite1 the workers in it are deprived of just compensation for their unusual sacrifices1 and society suffers a considerable loss through industrial friction and diminished productive efficiency4 ,in so far1 however1 as any of the foregoing occupational costs are borne by society1 as in the matter of industrial education1 or by the employer1 as by the devices of accident compensation or sickness insurance1 they do not demand provision in the form of extra wages4 ,other unusual sacrifices that entitle the worker to more than living wages1 are inherent in disagreeable or despised occupations4 ,the scavenger and the bootblack ought to get more than the performers of most other unskilled tasks4 ,on the principles of comparative individual desert1 they should receive larger remuneration than many persons who are engaged upon skilled but relatively pleasant kinds of work4 ,for if they were given the choice of expending the time and money required to fit them for the latter tasks1 or of taking up immediately their present disagreeable labour1 they would select the more pleasant occupations1 for the same or even a smaller remuneration4 ,and the majority of those who are now in the more skilled occupations would make the same choice4 ,hence the sacrifices inherent in disagreeable kinds of work are in many cases as great as or greater than the sacrifices of preparation for the more pleasant tasks2 consequently the doers of the former are relatively underpaid4 ,if all wages were regulated by some supreme authority according to the principles of complete justice1 the workers in disagreeable occupations would receive something more than living wages4 ,nor would this determination of rewards be in any way contrary to social welfare or the principle of maximum net results2 for the superior attractiveness of the other kinds of work would draw a sufficient supply of labour to offset the advantage conferred by higher wages upon the disagreeable occupations4 ,the main reason why the latter kind of labour is so poorly paid now is the fact that it is very plentiful1 a condition which is in turn due to the unequal division of industrial opportunity4 ,were the opportunities of technical education and of entrance to the higher crafts and professions more widely diffused1 the labourers offering themselves for the disagreeable tasks would be scarcer and their remuneration correspondingly larger4 ,this would be not only more comfortable to the abstract principles of justice1 but more conducive to social efficiency4 ,to sum up the discussion concerning the canon of efforts and sacrifices3 ,labourers have a just claim to more than living wages whenever they put forth unusual efforts1 and whenever their occupations involve unusual sacrifices1 either through costs of preparation1 exceptional hazards1 or inherent disagreeableness4 ,the precise amount of extra compensation due under any of these heads can be determined1 as a rule1 only approximately4 ,the next canon to be considered as a reason for more than living wages is that of productivity4 ,this offers little difficulty2 for the unusual product is always visible among men who are performing the same kind of work1 and the employer is always willing to give the producer of it extra compensation4 ,while superior productive power which is based solely upon superior native ability has only presumptive validity as a canon of justice1 that is ethically sufficient in our workaday world4 ,moreover1 the canon of human welfare demands that superior productivity receive superior rewards1 so long as these are necessary to evoke the maximum net product4 ,the canon of scarcity has exactly the same value as that of productivity4 ,society and the employer are well advised and are justified in giving extra compensation to scarce forms of labour when the product is regarded as worth the corresponding price4 ,this remains true even when the scarcity is due to restricted opportunity of preparation1 rather than to sacrifices of any sort4 ,in that case the higher rewards are as fully justified as the superior remuneration of that superior productivity which is based upon exceptional native endowments4 ,the amount of extra compensation which may properly be given on account of scarcity is determined either by the degree of sacrifice involved or by the ordinary operation of competition4 ,when men are scarce because they have made exceptional sacrifices of preparation1 they ought to be rewarded in full proportion to these sacrifices4 ,when they are scarce merely because of exceptional opportunities1 their extra compensation should not exceed the amount that automatically comes to them through the interplay of supply and demand4 ,the canon of human welfare has already received implicit application4 ,when due regard is given to efforts1 sacrifices1 productivity1 and scarcity1 the demands of human welfare1 both in its individual and its social aspects1 are sufficiently safeguarded4 ,in the foregoing pages the attempt has been made to describe the proportions in which a given wage fund ought to be distributed among the various classes of labourers who have claims upon the fund4 ,the first requisite of justice is that all should receive living wages4 ,it applies to all workers of average ability1 even to those who have no special qualifications of any sort4 ,when this general claim has been universally satisfied1 those groups of workers who are in any wise special1 whose qualifications for any reason differentiate them from and place them above the average1 will have a right to something more than living wages4 ,they will have the first claim upon the surplus that remains in the wage fund4 ,their claims will be based upon the various canons of distribution explained in detail above2 and the amounts of extra remuneration to which they will be entitled1 will be determined by the extent to which their special qualifications differentiate them from the average and unspecialised workers4 ,if the total available wage fund is merely sufficient to provide universal living wages and the extra compensation due to the specialised groups1 no section of the labour force will be justified in exacting a larger share4 ,even though the employer should withhold a part of the amount due to some weaker group1 a stronger group that is already getting its proper proportion would have no right to demand the unjustly withheld portion4 ,for this belongs neither to the employer nor to the powerful labour group1 but to the weaker section of labourers4 ,this does not mean that a powerful body of workers who are already receiving their due proportion as compared with other labour groups1 would not be justified in seeking any increase in remuneration whatever4 ,the increase might come out of profits1 or interest1 or the consumer1 and thus be in no sense detrimental to the rights of the other sections of labourers4 ,this problem will be considered a little later4 ,at present we confine our attention to the relative claims of different labour groups to a definite wage fund4 ,suppose1 however1 that after all workers have received living wages1 and all the exceptional groups have obtained those extra amounts which are due them on account of efforts1 sacrifices1 productivity1 and scarcity1 there remains a further surplus in the wage fund4 ,in what proportions should it be distributed8 ,it should be equally divided among all the labourers4 ,the proportional justice which has been already established can be maintained only by raising the present rates of payment equally in all cases4 ,all the average or unspecialised groups would get something more than living wages1 and all the other groups would have their extra compensation augmented by the same amount4 ,of course1 the wage-fund hypothesis which underlies the foregoing discussion is not realised in actual life1 any more than was the wage fund of the classical economists4 ,better than any other device1 however1 it enables us to describe and visualise the comparative claims of different groups of labourers who have a right to unequal amounts in excess of living wages4 ,wages ,versus ,profits ,let us suppose that the wage fund is properly apportioned among the different classes of labourers1 according to the specified canons of distribution4 ,may not one or all of the labour groups demand an increase in wages on the ground that the employer is retaining for himself an undue share of the product8 ,as we have seen in the last chapter1 the right of the labourers to living wages is superior to the right of the employer or business man to anything in excess of that amount of profits which will insure him against risks1 and afford him a decent livelihood in reasonable conformity with his accustomed plane of expenditure4 ,it is also evident that those labourers who undergo more than average sacrifices have a claim to extra compensation which is quite as valid as the similarly based claim of the employer to more than living profits4 ,in case the business does not provide a sufficient amount to remunerate both classes of sacrifices1 the employer may prefer his own to those of his employs1 on the same principle that he may prefer his own claim to a decent livelihood4 ,the law of charity permits a man to satisfy himself rather than his neighbour1 when the needs in question are of the same degree of urgency or importance4 ,as to those labourers who turn out larger products than the average1 or whose ability is unusually scarce1 there is no practical difficulty2 for the employer will find it profitable to give them the corresponding extra compensation4 ,the precise question before us1 then1 is the claims of the labourers upon profits for remuneration above universal living wages and above the extra compensation due on account of unusual efforts1 sacrifices1 productivity1 and scarcity4 ,let us call the wage that merely includes all these factors the equitable minimum4 ,in competitive conditions this question becomes practical only with reference to the exceptionally efficient and productive business men4 ,the great majority have no surplus available for wage payments in excess of the equitable minimum4 ,indeed1 the majority do not now pay the full equitable minimum2 yet their profits do not provide them more than a decent livelihood4 ,the relatively small number of establishments that show such a surplus as we are considering have been brought to that condition of prosperity by the exceptional ability of their directors1 rather than by the unusual productivity of their employs4 ,in so far as this exceptional directive ability is due to unusual efforts and sacrifices1 the surplus returns which it produces may be claimed with justice by the employer4 ,in so far as the surplus is the outcome of exceptional native endowments1 it may still be justly retained by him in accordance with the canon of productivity4 ,in other words1 when the various groups of workers are already receiving the equitable minimum1 they have no strict right to any additional compensation out of those rare surplus profits which come into existence in conditions of competition4 ,this conclusion is confirmed by reference to the canon of human welfare4 ,if exceptionally able business men were not permitted to retain the surplus in question they would not exert themselves sufficiently to produce it2 labour would gain nothing2 and the community would be deprived of the larger product4 ,when the employer is a corporation instead of an individual or a partnership1 and when it is operating in competitive conditions1 the same principles are applicable1 and the same conclusions justified4 ,the officers and the whole body of stockholders will have a right to those surplus profits that remain after the equitable minimum has been paid to the employs4 ,every consideration that urges such a distribution in the case of the individual business holds good for the corporation4 ,the corporation that is a monopoly will have the same right as the competitive concern to retain for its owners those surplus profits which are due to exceptional efficiency on the part of the managers of the business4 ,that part of the surplus which is derived from the extortion of higher than competitive prices cannot be justly retained1 since it rests upon no definite moral title4 ,as we saw in the chapter on monopoly1 the owners have no right to anything more than the prevailing rate of interest1 together with a fair return for their labour and for any unusual efficiency that they may exercise4 ,should the surplus in question be discontinued by lowering prices1 or should it be continued and distributed among the labourers8 ,as a rule1 the former course would seem morally preferable4 ,while the labourers1 as we shall see presently1 are justified in contending for more than the equitable minimum at the expense of the consumer1 their right to do so through the exercise of monopoly power is extremely doubtful4 ,whether this power is exerted by themselves or by the employer on their behalf1 it remains a weapon which human nature seems incapable of using justly4 ,wages ,versus ,interest ,turning now to the claims of the labourers as against the capitalists1 or interest receivers1 we perceive that the right to any interest at all is morally inferior to the right of all the workers to the equitable minimum4 ,as heretofore pointed out more than once1 the former right is only presumptive and hypothetical1 and interest is ordinarily utilised to meet less important needs than those supplied by wages4 ,through his labour power the interest receiver can supply all those fundamental needs which are satisfied by wages in the case of the labourer4 ,therefore1 it seems clear that the capitalist has no right to interest until all labourers have received the equitable minimum4 ,it must be borne in mind1 however1 that any claim of the labourer against interest falls upon the owners of the productive capital in a business1 upon the undertaker-capitalist1 not upon the loan-capitalist4 ,when all the labourers in an industry are receiving the equitable minimum1 have they a right to exact anything more at the expense of interest8 ,by interest we mean1 of course1 the prevailing or competitive rate that is received on productive capital--five or six per cent4 ,any return to the owners of capital in excess of this rate is properly called profits rather than interest1 and its relation to the claims of the labourers has received consideration in the immediately preceding section of this chapter4 ,the question1 then1 is whether the labourers who are already getting the equitable minimum would act justly in demanding and using their economic power to obtain a part or all of the pure interest4 ,no conclusive reason is available to justify a negative answer4 ,the title of the capitalist is only presumptive and hypothetical1 not certain and unconditional4 ,it is1 indeed1 sufficient to justify him in retaining interest that comes to him through the ordinary processes of competition and bargaining2 but it is not of such definite and compelling moral efficacy as to render the labourers guilty of injustice when they employ their economic power to divert further interest from the coffers of the capitalist to their own pockets4 ,the interest-share of the product is morally debatable as to its ownership4 ,it is a sort of no-man's property 7like the rent of land antecedently to its legal assignment through the institution of private landownership7 which properly goes to the first occupant as determined by the processes of bargaining between employers and employs4 ,if the capitalists get the interest-share through these processes it rightfully belongs to them2 if the labourers who are already in possession of the equitable minimum develop sufficient economic strength to get this debatable share they may justly retain it as their own4 ,the foregoing conclusion may seem to be a very unsatisfactory solution of a problem of justice4 ,however1 it is the only one that is practically defensible4 ,if the capitalist's claim to interest were as definite and certain as the labourer's right to a living wage1 or as the creditor's right to the money that he has loaned1 the solution would be very simple3 the labourers that we are discussing would have no right to strive for any of the interest4 ,but the claim of the capitalists is not of this clear and conclusive nature4 ,it is sufficient when combined with actual possession2 it is not sufficient when the question is of future possession4 ,the title of first occupancy as regards land is not valid until the land has been actually occupied2 and similarly the claim of the capitalist to interest is not valid until the interest has been received4 ,if the economic forces which determine actual possession operate in such a way as to divert the interest-share to the labourers1 they1 not the capitalists1 will have the valid moral title1 just as ,brown with his automobile rather than ,jones with his spavined nag will enjoy the valid title of first occupancy to a piece of ownerless land which both have coveted4 ,this conclusion is confirmed by reference to the rationally and morally impossible situation that would follow from its rejection4 ,if we deny to the labourers the moral freedom to strive for higher wages at the expense of the capitalist1 we must also forbid them to follow this course at the expense of the consumer4 ,for the great majority of consumers would stand to lose advantages to which they have as good a moral claim as the capitalists have to interest4 ,practically this would mean that the labourers have no right to seek remuneration in excess of the equitable minimum2 for such excess must in substantially all cases come from either the consumer or the capitalist4 ,on what principle can we defend the proposition that the great majority of labourers are forever restrained by the moral law from seeking more than bare living wages1 and the specialised minority from demanding more than that extra compensation which corresponds to unusual efforts1 sacrifices1 productivity1 and scarcity8 ,who has authorised us to shut against these classes the doors of a more liberal standard of living1 and a more ample measure of self development8 ,wages ,versus ,prices ,the right of the labourers to the equitable minimum implies obviously the right to impose adequate prices upon the consumers of the labourer's products4 ,this is the ultimate source of the rewards of all the agents of production4 ,suppose that the labourers are already receiving the equitable minimum4 ,are they justified in seeking any more at the cost of the consumer8 ,if all the consumers were also labourers the answer would be simple1 at least in principle3 rises in wages and prices ought to be so adjusted as to bring equal gains to all individuals4 ,the equitable minimum is adjusted to the varying moral claims of the different classes of labourers2 therefore1 any rise in remuneration must be equally distributed in order to leave this adjustment undisturbed4 ,it is a fact1 however1 that a large part of the consumers are not labourers2 consequently they cannot look to rises in wages as an offset to their losses through rises in prices4 ,can they be justly required to undergo this inconvenience for the benefit of labourers who are already getting the equitable minimum8 ,let us consider first the case of higher wages versus lower prices4 ,a few progressive and efficient manufacturers of shoes find themselves receiving large surplus profits which are likely to continue4 ,so far as the presumptions of strict justice are concerned1 they may1 owing to their superior productivity1 retain these profits for themselves4 ,seized1 however1 with a feeling of benevolence1 or a scruple of conscience1 they determine to divide future profits of this class among either the labourers or the consumers4 ,if they reduce prices the labourers will gain something as users of shoes1 but the other wearers of shoes will also be beneficiaries4 ,if the surplus profits are all diverted to the labourers in the form of higher wages the other consumers of shoes will gain nothing4 ,now there does not seem to be any compelling reason1 any certain moral basis1 for requiring the shoe manufacturers to take one course rather than the other4 ,either will be correct morally4 ,possibly the most perfect plan would be to effect a compromise by lowering prices somewhat and giving some rise in wages2 but there is no strict obligation to follow this course4 ,to be sure1 since the manufacturers have a right to retain the surplus profits1 they have also a right to distribute them as they prefer4 ,let us get rid of this complication by assuming that the manufacturers are indifferent concerning the disposition of the surplus1 leaving the matter to be determined by the comparative economic strength of labourers and consumers4 ,in such a situation it is still clear that either of the two classes would be justified in striving to secure any or all of the surplus4 ,no definite moral principle can be adduced to the contrary4 ,to put the case in more general terms3 there exists no sufficient reason for maintaining that the gains of cheaper production should go to the consumer rather than to the labourer1 or to the labourer rather than to the consumer1 so long as the labourer is already in receipt of the equitable minimum4 ,turning now to the question of higher wages at the cost of higher prices1 we note that this would result in at least temporary hardship to four classes of persons3 the weaker groups of wage earners2 all self employing persons1 such as farmers1 merchants1 and manufacturers2 the professional classes2 and persons whose principal income was derived from rent or interest4 ,all these groups would have to pay more for the necessaries1 comforts1 and luxuries of living1 without being immediately able to raise their own incomes correspondingly4 ,nevertheless1 the first three classes could in the course of time force an increase in their revenues sufficient to offset at least the more serious inconveniences of the increase in prices4 ,so far as the wage earners are concerned1 it is understood that all these would have a right to whatever advance in the money measure of the equitable minimum was necessary to neutralise the higher cost of living resulting from the success of the more powerful groups in obtaining higher wages4 ,the right of a group to the equitable minimum of remuneration is obviously superior to the right of another group to more than that amount4 ,and a supreme wage-determining authority would act on this principle4 ,it cannot be shown1 however1 that in the absence of any such authority empowered to protect the equitable minimum of the weaker labourers1 the more powerful groups are obliged to refrain from demanding extra remuneration4 ,the reason of this we shall see presently4 ,in the meantime we call attention to the fact that1 owing to the greater economic opportunity resulting from the universal prevalence of the equitable minimum and of industrial education1 even the weaker groups of wage earners would be able to obtain some increases in wages4 ,in the long run the more powerful groups would enjoy only those advantages which arise out of superior productivity and exceptional scarcity4 ,these two factors are fundamental1 and could not in any system of industry be prevented from conferring advantages upon their possessors4 ,as regards the self employing classes1 the remedy for any undue hardship suffered through the higher prices of commodities would be found in a discontinuance of their present functions until a corresponding rise had occurred in the prices of their own products4 ,they could do this partly by organisation1 and partly by entering into competition with the wage earners4 ,substantially the same recourse would be open to the professional classes4 ,in due course of time1 therefore1 the remuneration of all workers1 whether employs or self employed or professional1 would tend to be in harmony with the canons of efforts1 sacrifices1 productivity1 scarcity1 and human welfare4 ,since the level of rent is fixed by forces outside the control of labourers1 employers1 or landowners1 the receivers thereof would be unable to offset its decreased purchasing power by increasing its amount4 ,however1 this situation would not be inherently unjust1 nor even inequitable4 ,like interest1 rent is a workless income1 and has only a presumptive and hypothetical justification4 ,therefore1 the moral claim of the rent receiver to be protected against a decrease in the purchasing power of his income1 is inferior to the moral claim of the labourer to use his economic power for the purpose of improving his condition beyond the limits of welfare fixed by the equitable minimum4 ,what is true of the rent receiver in this respect applies likewise to the case of the capitalist4 ,as we saw a few pages back1 the wage earners are morally free to take this course at the expense of interest4 ,evidently they may do the same thing when the consequence is merely a diminution in its purchasing power4 ,to be sure1 if capital owners should regard their sacrifices in saving as not sufficiently rewarded1 owing either to the low rate or the low purchasing power of interest1 they would be free to diminish or discontinue saving until the reduced supply of capital had brought about a rise in the rate of interest4 ,should they refrain from this course they would show that they were satisfied with the existing situation4 ,hence they would suffer no wrong at the hands of the labourers who forced up wages at the expense of prices4 ,two objections come readily to mind against the foregoing paragraphs4 ,the more skilled labour groups might organise themselves into a monopoly1 and raise their wages so high as to inflict the same degree of extortion upon consumers as that accomplished by a monopoly of capitalists4 ,this is1 indeed1 possible4 ,the remedy would be intervention by the ,state to fix maximum wages4 ,just where the maximum limit ought to be placed is a problem that could be solved only through study of the circumstances of the case1 on the basis of the canons of efforts1 sacrifices1 productivity1 scarcity1 and human welfare4 ,the second objection calls attention to the fact that we have already declared that the more powerful labour groups would not be justified in exacting more than the equitable minimum out of a common wage fund1 so long as any weaker group was below that level2 yet this is virtually what would happen when the former caused prices to rise to such an extent that the weaker workers would be forced below the equitable minimum through the increased cost of living4 ,while this contingency is likewise possible1 it is not a sufficient reason for preventing any group of labourers from raising their remuneration at the expense of prices4 ,not every rise in prices would effect the expenditures of the weaker sections of the wage earners4 ,in some cases the burden would be substantially all borne by the better paid workers and the self employing1 professional1 and propertied classes4 ,when it did fall to any extent upon the weaker labourers1 causing their real wages to fall below the equitable minimum1 it could be removed within a reasonable time by organisation or by legislation4 ,even if these measures were found ineffective1 if some of the weaker groups of workers should suffer through the establishment of the higher prices1 this arrangement would be preferable on the whole to one in which no class of labourers was permitted to raise its remuneration above the equitable minimum at the expense of prices4 ,a restriction of this sort1 whether by the moral law or by civil regulation1 would tend to make wage labour a status with no hope of pecuniary progress4 ,it is true that a universal and indefinite increase of wages at the expense of prices might at length leave the great majority of the labourers no better off than they were when they had merely the equitable minimum4 ,such would certainly be the result if the national product were only sufficient to provide the equitable minimum for all workers1 and that volume of incomes for the other agents of production which was required to evoke from them a fair degree of productive efficiency4 ,in that case the higher wages would be an illusion4 ,the gain in the amount of money would be offset by the loss in its purchasing power4 ,even so1 this condition would be greatly superior to a rgime in which the labourers were universally prevented from making any effort to raise their wages above a fixed maximum4 ,concluding ,remarks ,all the principles and conclusions defended in this chapter have been stated with reference to the present distributive system1 with its free competition and its lack of legal regulation4 ,were all incomes and rewards fixed by some supreme authority1 the same canons of justice would be applicable1 and the application would have to be made in substantially the same way1 if the authority were desirous of establishing the greatest possible measure of distributive justice4 ,the main exception to this statement would occur in relation to the problem of raising wages above the equitable minimum at the expense of prices4 ,in making any such increase1 the wage-fixing authority would be obliged to take into account the effects upon the other classes of labourers1 and upon all the non-wage-earning classes4 ,substantially the same difficulties would confront the government in a collectivist organisation of industry4 ,the effect that a rise in the remuneration of any class would produce1 through a rise in the prices of commodities1 upon the purchasing power of the incomes of other classes1 would have to be considered and as nearly as possible ascertained4 ,this would be no simple task4 ,simple or not1 it would have to be faced2 and the guiding ethical principles would always remain efforts1 sacrifices1 productivity1 scarcity1 and human welfare4 ,the greater part of the discussion carried on in this chapter has a highly theoretical aspect4 ,from the nature of the subject matter this was inevitable4 ,nevertheless the principles that have been enunciated and applied seem to be incontestable4 ,in so far as they are enforcible in actual life1 they seem capable of bringing about a wider measure of justice than any other ethical rules that are available4 ,possibly the applications and conclusions have been laid down with too much definiteness and dogmatism1 and the whole matter has been made too simple4 ,on the other hand1 neither honesty nor expediency is furthered by an attitude of intellectual helplessness1 academic hyper-modesty1 or practical agnosticism4 ,if there exist moral rules and rational principles applicable to the problem of wage justice1 it is our duty to state and apply them as fully as we can4 ,obviously we shall make mistakes in the process2 but until the attempt is made1 and a certain 7and very large7 number of mistakes are made1 there will be no progress4 ,we have no right to expect that ready-made applications of the principles will drop from ,heaven4 ,for a long time to come1 however1 many of the questions discussed in this chapter will be devoid of large practical interest4 ,the problem immediately confronting society is that of raising the remuneration and strengthening generally the economic position of those labourers who are now below the level1 not merely of the equitable minimum1 but of a decent livelihood4 ,this problem will be the subject of the next chapter4 ,,chapter ,,xxv ,,methods ,,of ,,increasing ,,wages ,proposals for the reform of social conditions are important in proportion to the magnitude of the evils which they are designed to remove1 and are desirable in proportion to their probable efficacy4 ,applying these principles to the labour situation1 we find that among the remedies proposed the primacy must be accorded to a minimum wage4 ,it is the most important project for improving the condition of labour because it would increase the compensation of some two-thirds of the wage earners1 and because the needs of this group are greater and more urgent than the needs of the better-paid one-third4 ,the former are below the level of reasonable living1 while the latter are merely deprived of the opportunities of a more ample and liberal scale of living4 ,hence the degree of injustice suffered by the former is much greater than in the case of the latter4 ,a legal minimum wage is the most desirable single measure of industrial reform because it promises a more rapid and comprehensive increase in the wages of the underpaid than any alternative device that is now available4 ,the superior importance of a legally established minimum wage is obvious2 its superior desirability will form the subject of the pages that are immediately to follow4 ,the ,minimum ,wage in ,operation ,happily the advocate of this measure is no longer required to meet the objection that it is novel and utterly uncertain4 ,for more than twenty years it has been in operation in ,australasia4 ,it was implicit in the compulsory arbitration act of ,new ,zealand1 passed in #ahid2 for the wages which the arbitration boards enforce are necessarily the lowest that the affected employers are permitted to pay2 besides1 the district conciliation boards are empowered by the law to fix minimum wages on complaint of any group of underpaid workers4 ,the first formal and explicit minimum wage law of modern times was enacted by the state of ,victoria in #ahif4 ,in the beginning it applied to only six trades1 but it has been extended at various legislative sessions1 so that to-day it protects substantially all the labourers of the state1 except those employed in agriculture4 ,since the year #aijj all the other states of ,australia have made provision for the establishment of minimum wages4 ,at present1 therefore1 the legal minimum wage in some form prevails throughout the whole of ,australasia4 ,in #aiji the ,trade ,boards ,act authorised the application of this device to four trades in ,great ,britain4 ,in #aiac the provisions of the ,act were made applicable to four other trades1 and in #aiad to a third group of four industries4 ,a special minimum wage law was in #aiab enacted to govern the entire coal mining industry of the country4 ,the first minimum wage law in the ,united ,states was passed in #aiab by ,massachusetts4 ,it has been followed by similar legislation in ten other states2 namely1 ,arkansas1 ,california1 ,colorado1 ,kansas1 ,minnesota1 ,nebraska1 ,oregon1 ,utah1 ,washington1 and ,wisconsin4 ,california has adopted a constitutional amendment which specifically authorises minimum wage legislation for women and minors1 and ,ohio added a similar provision to her constitution which applies to men as well4 ,the minimum wage statutes of ,australasia and ,great ,britain cover all classes of workers1 but those of the ,united ,states are restricted to minors and women4 ,with the exception of the ,utah act1 all the important laws on this subject in all three regions establish minimum wages indirectly1 by authorising commissions and wage boards to determine the actual rates4 ,in ,australasia and ,great ,britain the statutes do not attempt to specify any standard to which the wage determinations of the boards must conform1 but the tendency in the former country in recent years has been to enforce a living wage as the minimum2 that is1 wage rates sufficiently high to provide a decent family livelihood for men1 and a reasonable personal livelihood for women and minors4 ,all the laws in ,america but one require the commissions to establish living wages4 ,in ,utah no commission is provided for1 as the law itself specifies in terms of money the minimum rates of remuneration that the employers of women are permitted to pay4 ,the effectiveness of the laws that have been put into operation is at least as great as their friends had dared to hope4 ,according to ,professor ,m4 ,b4 ,hammond of ,ohio1 who investigated the situation on the spot in the winter of #aiaa-aiab1 the people of ,australasia have accepted the minimum wage as a permanent policy in the industrial legislation of that part of the world4 ,professor ,hammond's observations1 and the replies of the ,chief ,factory ,inspector of ,melbourne to the ,new ,york ,factory ,investigating ,commission1 show the main effects of minimum wage legislation to be as follows3 sweating and strikes have all but disappeared2 the efficiency of the workers has on the whole increased2 the number of workers unable to earn the legal minimum has not been as great as most persons had feared1 and almost all of them have obtained employment at lower remuneration through special permits2 the legal minimum has not only not become the actual maximum1 but is exceeded in the case of the majority of workers2 no evidence exists to show that any industry has been crippled1 or forced to move out of the country2 with the exception of a very few instances1 the prices of commodities have not been raised by the law4#bea ,in the four trades of ,great ,britain which were first brought under the operation of the ,trade ,boards ,act1 and which presented some of the worst examples of economic oppression1 the beneficial effects of the minimum wage have been even more striking than in ,australasia4 ,wages have been considerably raised1 in some cases as high as one hundred per cent42 dispirited and helpless workers have gained courage1 power1 and self-respect to such an extent as to increase considerably their membership in trade unions1 and to obtain in several instances further increases in remuneration beyond the legal minimum2 the compensation of the better paid labourers has not been reduced to the level fixed by the trade boards2 the efficiency of both employs and productive processes has been on the whole increased2 the number of persons forced out of employment by the law is negligible2 no important rise of prices is traceable to the law2 and the number of business concerns unable to pay the increase in wages is too small to deserve serious consideration4 ,all these results had been established before the outbreak of the war4#beb ,the legal minimum wage has been carried into effect in only four states of our own country4 ,it covers practically all the industries employing women and minors in ,oregon and ,washington1 all the working women and girls of ,utah1 and the women and minors of a few trades in ,massachusetts4 ,the rates established for experienced women vary from #g4ej per week in ,utah to ten dollars a week for some classes in ,washington4 ,as the first wage determinations were put into effect only in #aiac1 ,american experience has been too short as well as too narrow to warrant certain conclusions4 ,so far as it has been applied1 however1 the legal minimum wage has been as successful in the ,united ,states as in ,australasia or ,great ,britain4 ,all competent witnesses agree that it has brought a considerable increase in wages to a considerable proportion of the women and minors in the industries in which it is operative1 and that it has neither thrown any important number of workers out of employment nor forced any important concern out of business4 ,speaking of the three leading industries in which minimum wages were first established in ,washington1 the ,industrial ,welfare ,commission of that state testifies3 ,seldom has any piece of legislation1 in prospect1 engendered so much discussion and so much criticism1 as did the minimum wage law1 with the intricacies of its ramifications touching almost every industry in the state1 large or small1 and the family of nearly every wage earner2 seldom1 too1 has any law1 in actuality1 been so well received1 its application been accomplished with so little open opposition1 and1 for a law of this character1 has been attended with so little industrial disturbance as that same minimum wage law4 ,none of the dire predictions made prior to the passage of the law have come about to an extent that questions the general efficiency of the law4 ,there has been no wholesale discharge of women employs1 no wholesale levelling of wages1 no wholesale replacing of higher paid workers by cheaper help1 no tendency to make the minimum the maximum1 while the employers of the state in general have been following the letter and spirit of the law1 and aiding greatly in its application4444 ,the law1 in other words1 has advanced the wages of practically sixty per cent4 of the workers in these industries1 and has done it without serious opposition at a time when business conditions were none too good4#bec ,the ,bureau of ,labour ,statistics of the ,united ,states investigated the operation of the minimum wage in the mercantile establishments of ,oregon at the end of the first year4 ,the conclusions of the investigators were in brief that both the number and the proportion of women getting the legal minimum 7#i4be per week7 for adults had increased1 that the proportion obtaining more than this rate had likewise increased1 that those who had received a rise in remuneration did not show any decline in efficiency1 that women had not been displaced by men1 and that the average increase in the labour cost resulting from the advance in wages was only three mills on each dollar of sales4#bed ,the effects of the ,utah law during the first year of its operation were summarised by the ,labour ,commissioner1 ,mr4 ,h4 ,t4 ,haines1 as follows3 a rise in the wages of a number of women and girls who most needed the additional sums of money2 increased efficiency of female workers admitted by most employers2 but few cases of women or girls utterly deprived of employment by the law2 none of the higher paid women suffered a reduction in wages2 and ninety per cent4 of the employers are satisfied with the minimum wage statute4#bee ,so far as the law has been applied in ,massachusetts1 it seems to be relatively as successful as in the other three states4#bef ,the ,question of ,constitutionality ,the principal reason why the minimum wage laws on the statute books of the other seven states have not been carried into effect1 is the uncertainty of the validity of minimum wage legislation in our constitutional system4 ,in ,november1 #aiad1 a district judge granted a writ of injunction1 restraining the ,minimum ,wage ,commission of ,minnesota from enforcing their wage determinations1 on the ground that the law attempted to delegate legislative power1 and that its provisions violated that section of the fourteenth amendment to the ,united ,states ,constitution which forbids any state to deprive a person of life1 liberty1 or property without due process of law4 ,one of the courts of ,arkansas has taken substantially the same position4 ,the second objection urged by the ,minnesota judge is probably much the more serious of the two1 and is the one upon which chief emphasis has been laid in the briefs filed in various courts by the opponents of minimum wage legislation4 ,as regards labour legislation1 due process of law may be practically translated1 reasonable and necessary exercise of the ,state's police power4 ,and the police power means that indefinite power of the ,state to legislate for the health1 safety1 morals1 and welfare of the community4#beg ,now it is obvious that a minimum wage law deprives both employer and employ of some liberty of contract1 and also that it virtually deprives the former of some property1 inasmuch as it generally increases his outlay for wages4 ,on the other hand1 this restriction of liberty and equivalent diminution of property seem to be carried out in harmony with due process of law1 since they constitute an exercise of the police power of the ,state on behalf of the general welfare4 ,some months before the ,minnesota judge granted the writ of injunction against the enforcement of the minimum wage law of that state1 a lower court and the ,supreme ,court of ,oregon had pronounced the ,oregon statute constitutional1 as a legitimate exercise of the police power4 ,an appeal from this judgment was argued in the ,supreme ,court of the ,united ,states1 ,dec4 #ag1 #aiad1 but no decision has yet 7,october1 #aiaf7 been rendered4 ,until the highest court has spoken on the question of constitutionality1 no state is likely to take any further step toward establishing minimum wages4 ,should the decision of the ,supreme ,court be unfavourable valid minimum wage legislation will be impossible without an amendment of the ,united ,states ,constitution4#beh ,the ,ethical and ,political ,aspects ,whether it be considered from the viewpoint of ethics1 politics1 or economics1 the principle of the legal minimum wage is impregnable4 ,the ,state has not only the moral right but the moral duty to enact legislation of this sort1 whenever any important group of labourers are receiving less than living wages4 ,one of the elementary functions and obligations of the ,state is to protect citizens in the enjoyment of their natural rights2 and the claim to a living wage is1 as we have seen1 one of the natural rights of the person whose wages are his only means of livelihood4 ,therefore1 the establishment of minimum living wages is not among the so-called optional functions of the ,state in our present industrial society4 ,whenever it can be successfully performed1 it is a primary and necessary function4 ,so far as political propriety is concerned1 the ,state may as reasonably be expected to protect the citizen against the physical1 mental1 and moral injury resulting from an unjust wage contract1 as to safeguard his money against the thief1 his body against the bully1 or his life against the assassin4 ,in all four cases the essential welfare of the individual is injured or threatened through the abuse of superior force and cunning4 ,inasmuch as the legal minimum wage is ethically legitimate1 the question of its enactment is1 politically speaking1 entirely a question of expediency4 ,the ,economic ,aspect ,now the question of expediency is mainly economic4 ,a great deal of nonsense has been written and spoken about the alleged conflict between the legal minimum wage and economic law4 ,economists have used no such language1 indeed2 for they know that economic laws are merely the expected uniformities of social action in given circumstances4 ,the economists know that economic laws are no more opposed to a legal minimum wage than to a legal eight hour day1 or legal regulations of safety and sanitation in work places4 ,all three of these measures tend to increase the cost of production1 and sometimes carry the tendency into reality4 ,a minimum wage law is difficult to enforce1 but not much more so than most other labour regulations4 ,at any rate1 the practical consideration is whether even a partial enforcement of it will not result in a marked benefit to great numbers of underpaid workers4 ,it may throw some persons1 the slower workers1 out of employment2 but here1 again1 the important question relates to the balance of good over evil for the majority of those who are below the level of decent living4 ,at every point1 therefore1 the problem is one of concrete expediency1 not of agreement or disagreement with a real or imaginary economic law4 ,some of those who oppose the device on the ground of expediency set up an argument which runs about as follows3 the increase in wages caused by a minimum wage law will be shifted to the consumer in the form of higher prices2 this result will in turn lead to a falling off in the demand for products2 a lessened demand for goods means a reduced demand for labour2 and this implies a diminished volume of employment1 so that the last state of the workers becomes worse than the first4 ,not only is this conception too simple1 but it proves too much4 ,if it were correct every rise in wages1 howsoever brought about1 would be ill advised2 for every rise would set in motion the same fatal chain of events4 ,voluntary increases of remuneration by employers would be quite as futile as the efforts of a labour union4 ,this is little more than the old wages fund theory in a new dress4 ,and it is no less contrary to experience4 ,the argument is too simple because it is based upon an insufficient analysis of the facts4 ,there are no less than four sources from which the increased wages required by a minimum wage law might in whole or in part be obtained4 ,in the first place1 higher wages will often give the workers both the physical capacity and the spirit that make possible a larger output4 ,thus1 they could themselves equivalently provide a part at least of their additional remuneration4 ,when1 secondly1 the employer finds that labour is no longer so cheap that it can be profitably used as a substitute for intelligent management1 better methods of production1 and up to date machinery1 he will be compelled to introduce one or more of these improvements1 and to offset increased labour cost by increased managerial and mechanical efficiency4 ,this is what seems to have happened in the tailoring industry of ,england4 ,according to ,mr4 ,tawney1 the increased costs of production have1 on the whole1 been met by better organisation of work and by better machinery4#bei ,in the third place1 a part of the increased wage cost can be defrayed out of profits1 in two ways3 through a reduction in the profits of the majority of business concerns in an industry2 but more frequently through the elimination of the less efficient1 and the consequent increase in the volume of business done by the more efficient4 ,in the latter establishments the additional outlay for wages might be fully neutralised by the diminished managerial expenses and fixed charges per unit of product4 ,this elimination of unfit undertakers would not only be in the direction of greater social efficiency1 but in the interest of better employment conditions generally2 for it is the less competent employers who are mainly responsible for the evil of sweating1 when they strive to reduce the cost of production by the only method that they know2 that is1 the oppression of labour4 ,should the three foregoing factors fall short of providing or neutralising the increased wages1 the recourse would necessarily be to the fourth source2 namely1 a rise in the price of products4 ,however1 there is no definite reason for assuming that the rise will in any case be sufficient to cause a net decrease of demand4 ,in ,oregon the increased labour cost due to the minimum wage law amounted1 as we have seen1 to only three mills per dollar of sales in mercantile establishments4 ,even if this were all shifted to the consumer--something that is practically impossible--it would be equivalent to an increase of only three cents on each ten dollars' worth of purchases1 and thirty cents on each hundred4 ,the reduction in sales on account of such a slight rise in prices would be infinitesimal4 ,in the case of possibly the majority of products1 the lessened demand on the part of the other classes might be entirely counterbalanced by the increased demand at the hands of the workers whose purchasing power had been raised through the minimum wage law4 ,the effect upon sales1 and hence upon business and production1 which follows from an increase in the effective consuming power of the labouring classes is frequently ignored or underestimated4 ,so far as consumers' goods are concerned1 it seems certain that a given addition to the income of the wage-earning classes will lead to a greater increase in the demand for products than an equal addition to the income of any other section of the people4 ,nevertheless1 the possibility must be admitted of some diminution of employment1 owing to higher prices and decreased demand4 ,and it is certain that some workers would not be worth the legal minimum to their employers4 ,a part1 but probably not all1 of these could find employment at a lower wage1 through a system of permits for slow workers4 ,whatever the amount of unemployment resulting from both these causes1 it would undoubtedly be an evil of lesser magnitude than that which at present follows from the under-payment of a majority of the labouring population4 ,and it could be remedied by two measures which are in any case necessary for social welfare1 and which would be hastened by the establishment of a legal minimum wage4 ,these are adequate and scientific laws and institutions to deal with the general problem of unemployment1 and a comprehensive system of industrial and vocational training4 ,these conclusions1 then1 seem to be justified3 the economic objections to a legal minimum wage are not essentially different from those that may be urged against any other beneficial labour legislation2 and they have been sufficiently refuted by experience to throw the burden of proof upon the objectors4 ,expediency suggests1 however1 that in the ,united ,states the device should be applied gradually in two respects3 for a few years it ought to be confined to women and minors2 and when it is extended to men1 the rates should approach the level of a complete family living wage by stages1 covering1 say1 three or four years4 ,the former restriction would enable the law to be carried through its experimental stages with a minimum disturbance to industry as a whole1 and with a minimum of opposition1 and the latter would greatly reduce the danger of male unemployment4#bfj ,opinions of ,economists ,when the present writer made an argument for the legal minimum wage something more than ten years ago1 he was able to find only one ,american economist who had touched the subject1 and the verdict of that one was unfavourable4#bfa ,a little over a year ago1 ,dr4 ,john ,o',grady sent an inquiry to one hundred and sixty economists of the ,united ,states to ascertain their opinions on the same subject4 ,of the ninety-four who replied seventy were in favour of a minimum wage law for women and minors1 thirteen were opposed1 and eleven were non-committal2 fifty-five favoured such legislation for men1 twenty were against it1 and nineteen were disinclined to give a categorical answer4 ,about three-fourths of those who responded expressed the opinion that the measure would tend to increase the efficiency both of the workers and of methods of production4#bfb ,it is worthy of note that the nine members of the late ,federal ,commission on ,industrial ,relations1 although disagreeing widely and variously on most other important questions and proposals1 were all favourable to a minimum wage law for women and minors4#bfc ,the most comprehensive and most searching criticism of the legal minimum wage from the viewpoint of economic theory has been made by ,professor ,f4 ,w4 ,taussig4#bfd ,while he does not commit himself definitely to the assertion that a universal minimum wage of1 say1 eight dollars per week1 would cause a notable amount of unemployment among women1 he regards this consequence as sufficiently probable to indicate the need of going slow in the regulation of women's wages4 ,specifically1 he would have public wage boards refrain from fixing the minimum rates high enough to maintain women living away from home4 ,his final and only serious argument for this position relates to the marginal effectiveness of women workers4 ,he assumes that all the fitful1 untrained1 indifferent women are got rid of2 that all who offer themselves for work at the age of 7say7 eighteen years have had an industrially helpful education1-- and then raises the question whether all of them will be able to get distinctly higher wages than are now current4#bfe ,obviously the question is not serious unless it contemplates the probability of unemployment for a considerable proportion4 ,if only one per cent4 or less of the women should be unable to find employment at the higher wages1 the net social advantage of the minimum wage device would be so obvious as to render ,professor ,taussig's opposition quite unreasonable4 ,making the assumptions quoted above from his pages1 let us try to see whether his apprehensions are economically justifiable4 ,if they are reasonable or probable they must rest on one of two fundamental conditions3 the occupations available to women are too few to absorb all that would seek to become wage earners at eight dollars per week2 or a considerable section of them would be unable to produce such a high wage4 ,possibly the first of these assumptions is true1 but neither ,professor ,taussig nor any other authority has presented evidence to support it1 and it is on the face of things not sufficiently probable to justify hesitation in the advocacy of a minimum living wage4 ,if the second assumption be correct1 if the product of a considerable section of women 7all adequately trained7 would be insufficient to yield them eight dollars per week1 in addition to the other costs of production1 the conclusion is inevitable that the same result would follow the attempt to pay all male adults 7likewise adequately trained7 a family living wage of1 say1 fifteen dollars per week4 ,for the product of the average man does not exceed that of the average woman by even as great a ratio as fifteen to eight4 ,if the average woman is not worth eight dollars a week to an employer in any kind of woman's occupation1 the average man is not worth fifteen dollars4 ,therefore1 we cannot hope1 even with the aid of a thorough system of industrial and vocational training1 to provide all adult males of average capacity with a family living wage and the minimum means of living a reasonable life4 ,this is a veritable counsel of despair4 ,it implies either that the law of diminishing returns is already operating in this country in such a way as to prevent the national product from being sufficiently large to provide a minimum wage of fifteen dollars a week for men1 and eight dollars a week for women2 or that the product1 though ample for this purpose1 and for all the other necessary payments to the higher priced workers and to the other agents of production1 cannot under our present industrial system be so distributed as to attain the desired end4 ,for the first of these hypotheses there is no evidence worthy of the name4 ,if ,professor ,king is right in his estimate of an average family income of #adid dollars annually#bff the difficulty before us does not lie in the field of production4 ,professor ,taussig seems to rest his fears on the second hypothesis1 on the assumed impossibility of bringing about the required distribution2 for he points out that increased efficiency of the workers may1 like increased efficiency of the material instrumentalities of production1 in the long run redound mainly to the benefit of the consumers1 while wages may be little if any above the old level4 ,if these fears are justified1 if the difficulty is entirely one of the mechanism of distribution1 and if it cannot be overcome by legal enactment1 then is our competitive organisation of industry bankrupt1 and the sooner we find out that fact definitely the better4 ,if the legal minimum wage will help to expose such a situation1 will show that1 no matter how much the productivity of the workers may be increased1 a large proportion of them must by the very nature of the competitive system be forever condemned to live below the level of decent existence1 then the minimum wage is worth having merely as an instrument of economic enlightenment4 ,professor ,taussig's argument and illustrations#bfg seem to contemplate a condition in which the number of women who become fitted for a certain trade is excessive relatively to the demand for its products1 and to the supply of women in other industries4 ,were industrial training thus misdirected1 and were the trained persons unable or unwilling to distribute themselves over other occupations1 they would1 indeed1 face precisely the same dilemma as do the unskilled workers to-day4 ,that is2 a majority would be condemned to insufficient wages1 or a minority to unemployment4 ,but we have been assuming an adequate system of industrial and vocational training1 a well-balanced system1 one that would enable the workers to adjust their supply to the demand throughout the various occupations4 ,in these conditions the economic axiom that a supply of goods is a demand for goods should become beneficently effective3 the workers should all be able to find employment1 and to obtain the greater part of their increased product4 ,surely ,professor ,taussig does not mean to commit himself to the view that every increase in the productive power of the workers will in the long run help them only inasmuch as they are consumers1 the lion's share of the additional product being taken by other classes4 ,probably such is the usual result in a rgime of unregulated competition1 and unlimited freedom as regards the wage contract4 ,but this is precisely what we expect a minimum wage law to correct and prevent4 ,we rely upon this device to enable the workers to retain for themselves that share of the product which under free competition would automatically go to the non-labouring consumers4 ,we hope that blind and destructive economic force can be held in check by deliberate and beneficent social control4 ,the fact of the matter seems to be that ,professor ,taussig's argument is too hypothetical and conjectural to justify his pessimistic conclusions4 ,it is unpleasantly suggestive of the reasoning by which the classical economists tried to show the ,english labourers the folly and futility of trade unionism4 ,other ,legislative ,proposals ,the ideal standard of a minimum wage law is a scale of remuneration adequate not only to the present needs of individuals and families1 but to savings for the contingencies of the future4 ,until such time as the compensation of all labourers has been brought up to this level1 the ,state should make provision for cheap housing1 and for insurance against accidents1 sickness1 invalidity1 old age1 and unemployment4 ,the theory underlying such measures is that they would merely supplement insufficient remuneration1 and indirectly contribute to the establishment of genuine living wages4 ,in ,europe1 housing and insurance legislation is so common that no reasonable and intelligent person any longer questions the competency or propriety of such action by the ,state4 ,if an adequate legal minimum wage1 in the sense just defined1 were universally established1 the ,state would not be required to do anything further to effectuate wage justice1 except in the matter of vocational and industrial education4 ,this would qualify practically all persons to earn at least a living wage1 and would enable those who underwent unusual sacrifices either before or during their employment to command something over and above4 ,in other words1 all workers would then be able to obtain what we have called the equitable minimum4 ,and the labouring class as a whole would possess sufficient economic power to secure substantially all that was due by any of the canons of distributive justice4 ,labour ,unions ,the general benefits and achievements of labour organisations in the ,united ,states down to the beginning of the present century1 cannot be more succinctly nor more authoritatively stated than in the words of the ,united ,states ,industrial ,commission3 ,an overwhelming preponderance of testimony before the ,industrial ,commission indicates that the organisation of labour has resulted in a marked improvement in the economic condition of the workers4#bfh ,some of the most conspicuous and unquestionable proofs of rises in wages effected by the unions are afforded by the building trades1 the printing trades1 the coal mining industry1 and the more skilled occupations on the railroads4 ,between #ahij and #aijg wages increased considerably more in the organised than in the unorganised trades4#bfi ,nevertheless1 when all due credit is given to the unions for their part in augmenting the share of the product received by labour1 there remain two important obstacles which seriously lessen their efficacy as a means of raising the wages of the underpaid4 ,the first is the fact that the unions still embrace only a small portion of the total number of wage earners4 ,according to ,professor ,leo ,wolman1 a little more than twenty-seven million of the thirty-eight million persons engaged in gainful occupations in the ,united ,states in #aiaj were wage earners in the ordinary sense of that phrase1 and of these twenty-seven million only #b1aaf1cag1 or #g4g per cent41 were members of labour organisations4#bgj ,the membership to-day is about two and three quarter millions4 ,if the total number of wage earners increased between #aiaj and #aiaf at the same rate as during the preceding decade1 the organised portion is now somewhat less than #g4g per cent4 of the whole4 ,evidently the labour unions have not grown with sufficient rapidity1 nor are they sufficiently powerful to warrant the hope that they will be soon able to lift even a majority of the underpaid workers to the level of living wage conditions4 ,the second obstacle is the fact that only a small minority of the members of labour unions are drawn from the unskilled and underpaid classes1 who stand most in need of organisation4 ,the per cent4 of those getting less than living wages that is in the unions is almost negligible4 ,with the exception of a few industries1 the unskilled and the underpaid show very little tendency to increase notably their organised proportion4 ,the fundamental reason of this condition has been well stated by ,john ,a4 ,hobson3 ,the great problem of poverty 444 resides in the conditions of the low-skilled workman4 ,to live industrially under the new order he must organise4 ,he cannot organise because he is so poor1 so ignorant1 so weak4 ,because he is not organised he continues to be poor1 ignorant1 weak4 ,here is a great dilemma1 of which whoever shall have found the key will have done much to solve the problem of poverty4#bga ,the most effective and expeditious method of raising the wages of the underpaid through organisation is by means of the industrial1 as distinguished from the trade1 or craft1 union4 ,in the former all the trades of a given industry are united in one compact organisation1 while the latter includes only those who work at a certain trade or occupation4 ,for example3 the ,united ,mine ,workers embrace all persons employed in coal mines1 from the most highly skilled to the lowest grade of unspecialised labour2 while the craft union is exemplified in the engineers1 firemen1 conductors1 switchmen1 and other groups having their separate organisations in the railroad industry4 ,the industrial union is as much concerned with the welfare of its unskilled as of its skilled members1 and exerts the whole of its organised force on behalf of each and every group of workers throughout the industry which it covers4 ,the superior suitability of the industrial type of union to the needs of the unskilled labourers is seen in the fact that more of them are organised in the coal mining than in any other industry1 and have received greater benefits from organisation than their unskilled fellow workers in any other industry4 ,were the various classes of railway employs combined in one union1 instead of being organised along the lines of their separate crafts1 it is quite improbable that the unskilled majority would be getting1 as they now are getting1 less than living wages4 ,while it is true that the various craft unions in an industry are often federated into a comprehensive association1 the bond uniting them is not nearly so close1 nor so helpful to the weaker groups of workers as in the case of the industrial unions4 ,human nature being what it is1 however1 the members of the skilled crafts cannot all be induced or compelled to adopt the industrial type of organisation4 ,the ,knights of ,labour attempted to accomplish this1 and for a time enjoyed a considerable measure of success1 but in the end the organisation was unable to withstand those fundamental inclinations which impel men to prefer the more narrow1 homogeneous1 and exclusive type of association4 ,the skilled workers refused to merge their local and craft interests in the wider interests of men with whom they had no strong nor immediate bonds of sympathy4 ,among labourers1 as well as among other persons1 the capacity for altruism is limited by distance in space and occupational condition4 ,the passion for distinction likewise affects the wage earner1 impelling the higher groups consciously or unconsciously to oppose association that tends to break down the barrier of superiority4 ,owing to their greater resources and greater scarcity1 the skilled members of an industrial union are less dependent upon the assistance of the unskilled than the latter are dependent upon the former2 yet the skilled membership is always in a minority1 and therefore in danger of being subordinated to the interests of the unskilled majority4 ,for these and many other reasons it is quite improbable that the majority of union labourers can be amalgamated into industrial unions in the near future4 ,the most that can be expected is that the various occupational unions within each industry should become federated in a more compact and effective way than now prevails1 thus conserving the main advantages of the local and craft association1 while assuring to the unskilled workers some of the benefits of the industrial union4 ,organisation ,versus ,legislation ,in the opinion of some labour leaders1 the underpaid workers should place their entire reliance upon organisation4 ,the arguments for this position are mainly based upon three contentions3 it is better that men should do things for themselves than to call in the intervention of the ,state2 if the workers secure living wages by law they will be less likely to organise1 or to remain efficiently organised2 and if the ,state fixes a minimum wage it may some day decide to fix a maximum4 ,within certain limits the first of these propositions is incontestable4 ,the self education1 self reliance1 and other experiences obtained by the workers through an organised struggle for improvements of any kind1 are too valuable to be lightly passed over for the sake of the easier method of ,state assistance4 ,indeed1 it would be better to accept somewhat less1 or to wait somewhat longer1 in order that the advantages might be secured through organisation4 ,however1 these hypotheses are not verified as regards the minimum wage problem4 ,the legal method promises with a high degree of probability to bring about universal living wages within ten or fifteen years4 ,the champions of organisation can point to no solid reasons for indulging the hope that their method would achieve the same result within a half a century4 ,therefore1 the advantages of the device of organisation are much more than neutralised by its disadvantages4 ,the fear that the devotion of the workers to the union would decline as soon as living wages had been secured by law1 seems to have no adequate basis either in experience or in probability4 ,speaking of the establishment of minimum wages in the tailoring industry of ,great ,britain1 ,mr4 ,tawney declares that it has given an impetus to trade unionism among both men and women4 ,the membership of the societies connected with the tailoring trade has increased1 and in several districts the trade unions have secured agreements fixing the standard rate considerably above the minimum contained in the ,trade ,board's determination4#bgb ,similar testimony comes from ,australasia4 ,indeed1 this is precisely what we should be inclined to expect2 for the workers whose wages had been raised would for the first time possess the money and the courage to support unions2 and would have sufficient incentives thereto in the natural desire to obtain something more than the legal minimum1 and in the realisation that organisation was necessary to give them a voice in the determination of the minimum1 and to enable them to co-operate in compelling its enforcement4 ,indeed1 general experience shows that organisation becomes normally efficient and produces its best results only among workers who have already approximated the level of living wages4 ,to be sure1 the ,state could set up maximum instead of minimum wages1--if the employing classes were sufficiently powerful4 ,but all indications point to a decline rather than an increase in their political influence1 and to a corresponding expansion in the governmental influence of the labouring classes and their sympathisers4 ,moreover1 the labour leaders who urge this objection are inconsistent1 inasmuch as they advocate other beneficial labour legislation4 ,the distinction which they profess to find between laws that merely remove unfair legal and judicial disabilities and laws that reduce the length of the working day or fix minimum wages1 has no importance in practical politics or in the mind of the average legislature4 ,if the political influence of labour should ever become so weak and that of capital so strong as to make restrictive labour legislation generally feasible1 legislators would not confine their unfriendly action to the field of positive measures4 ,they would be quite as ready to pass a law prohibiting strikes as to enact a statute fixing maximum wages4 ,the formal legalisation of strikes1 picketing1 and the primary boycott which is contained in the ,clayton ,act1 and for which the labour unions worked long and patiently1 could conceivably be seized upon by some future unfriendly ,congress as a precedent and provocation for legislation which would not only repeal all the favourable provisions of the ,clayton ,act1 but subject labour to entirely new and far more odious restraints and interferences4 ,the fact that governments passed maximum wage laws in the past is utterly irrelevant to the question of wage legislation to-day4 ,a legal minimum wage1 and a multitude of other protective labour laws are desirable and wise in the twentieth century for the simple reason that labour and the friends of labour are sufficiently powerful to utilise this method1 and because their influence seems destined to increase rather than decrease4 ,the contrary hypothesis is too improbable for serious consideration4 ,the conclusions that seem justified by a comprehensive and critical view of all the facts of the situation1 are that organisation is not of itself an adequate means of bringing about living wages for the underpaid1 but that it ought nevertheless to be promoted and extended among these classes1 not only for its direct effect upon wages1 but for its bearing upon legislation4 ,the method of organisation and the method of legislation are not only not mutually opposed1 but are in a very natural and practical manner complementary4 ,participation in ,capital ,ownership ,while those workers whose remuneration is below the level of decent maintenance are not ordinarily in a position to become owners of any kind of capital1 many of them1 especially among the unmarried men1 can accumulate savings by making large sacrifices4 ,as a matter of fact1 hundreds of thousands of the underpaid have become interest receivers through the medium of savings banks1 real estate possessions1 and insurance policies4 ,every effort in this direction is distinctly worth while1 and deserving of encouragement4 ,labourers who are above the minimum wage level can1 of course1 save much larger amounts1 and with less sacrifices than the underpaid classes4 ,in all cases the main desideratum is that the workers should derive some income from capital2 but it is almost equally important that their capital ownership should wherever possible take the form of shares in the industry in which they are employed1 or the store at which they buy their goods4 ,this means co-operative production and co-operative distribution4 ,the general benefits of the co-operative enterprise have already been described in chapter xiv4 ,for the wage earner proprietorship in a co-operative concern is preferable to any other kind of capital ownership because of the training that it affords in business management and responsibility1 in industrial democracy1 and in the capacity to subordinate his immediate and selfish interests to his more remote and larger welfare4 ,co-operative ownership of the tools with which men work has advantages of its own over co-operative ownership of the stores from which they made their purchases1 inasmuch as it increases their control over the conditions of employment1 and gives them incentives to efficiency which results in a larger social product and a larger share thereof for themselves4 ,as already pointed out in chapter xiv1 the ideal type of productive co-operation is that known as the perfect form1 in which the workers are the exclusive owners of the concern where they exercise their labour4 ,nevertheless1 the federal type1 in which the productive concern is directly owned by a wholesale co-operative1 indirectly by the retail co-operative store1 and ultimately by the co-operative consumers1--presents one important advantage4 ,it could be so modified as to enable the employs of the productive enterprise to share the ownership of the latter with the wholesale establishment4 ,such an arrangement would at once give the workers the benefits of productive co-operation mentioned above1 and render probable a satisfactory adjustment of the conflicting claims of producers and consumers4 ,as intimated in chapter xxiv1 such a conflict is inherent in every system of industrial organisation1 and will become more evident and more acute in proportion to the strengthening of the position of labour4 ,a final reason for ownership of capital by labour deserves mention here1 even though it has no immediate bearing upon the question of remuneration4 ,were all labourers receiving the full measure of wages to which they are entitled by the canons of distributive justice1 it would still be highly desirable that the majority if not all of them should possess some capital1 preferably in the productive and distributive concerns in which they were immediately interested4 ,it does not seem probable that our economic system as now constituted1 with the capital owners and the capital operators for the most part in two distinct classes1 will be the final form of industrial organisation4 ,particularly does this arrangement seem undesirable1 incongruous1 and unstable in a society whose political form is that of democracy4 ,ultimately the workers must become not merely wage earners but capitalists4 ,any other system will always contain and develop the seeds of social discontent and social disorder4 ,,references ,,on ,,section ,,iv ,,adams ,,and ,,sumner3 ,labour ,problems4 ,macmillan2 #aije4 ,,commons ,,and ,,andrews3 ,principles of ,labour ,legislation4 ,harpers2 #aiaf4 ,,walker3 ,the ,wages ,question4 ,new ,york2 #ahgf4 ,,ryan3 ,a ,living ,wage4 ,macmillan2 #aijf4 ,,snowden3 ,the ,living ,wage4 ,london2 ,hodder ,stoughton4 ,o',,grady3 ,a ,legal ,minimum ,wage4 ,washington2 #aiae4 ,,broda3 ,la ,fixation ,lgale des ,salaires4 ,paris2 #aiab4 ,n4 ,y4 ,,factory ,,investigating ,,commission4 ,appendix to ,vol4 ,,iii4 ,,tawney3 ,minimum ,rates in the ,chain-,making ,industry4 ,london2 #aiad4 ,minimum ,rates in the ,tailoring ,industry4 ,london2 #aiae4 ,,turman3 ,le ,catholicisme ,social4 ,paris2 #aijj4 ,,pottier3 ,de ,jure et ,justitia4 ,liege2 #aijj4 ,,polier3 ,l',ide du ,juste ,salaire4 ,paris2 #aijc4 ,,menger3 ,the ,right to the ,whole ,produce of ,labour4 ,london2 #ahii4 ,,garriguet3 ,rgime du ,travail4 ,paris2 #aijh4 ,,nearing3 ,reducing the ,cost of ,living4 ,philadelphia2 #aiad4 ,,chapin3 ,the ,standard of ,living in ,new ,york ,city4 ,new ,york2 #aiji4 ,also the works on co-operation cited in connection with ,section ,,ii1 and those of ,hobson1 ,carver1 ,nearing and ,streightoff4 ,,footnotes3 #bea ,see articles by ,hammond in the ,american ,economic ,review1 ,june1 #aiac1 and in the ,annals of the ,american ,academy of ,political and ,social ,science1 ,july1 #aiac2 and page #fb of the ,appendix to the third volume of the ,report of the ,new ,york ,state ,factory ,investigating ,commission4 #beb ,see the replies of the ,london ,board of ,trade to the ,n4 ,y4 ,factory ,investigating ,commission1 on pages #gg1 #gh of the volume cited above2 and especially the two monographs by ,r4 ,h4 ,tawney1 ,the ,establishment of ,minimum ,rates in the ,chain-,making ,industry1 and ,the ,establishment of ,minimum ,rates in the ,tailoring ,industry4 ,london2 #aiad and #aiae4 #bec ,first ,biennial ,report of the ,industrial ,welfare ,commission of ,washington1 pp4 #ac1 #ae4 #bed ,effect of ,minimum ,wage ,determinations in ,oregon4 ,bulletin ,no4 #agf of ,united ,states ,bureau of ,labour ,statistics4 #bee ,from a paper read before the ,national ,convention of the ,association of ,government ,labour ,officials1 ,nashville1 ,tenn41 ,june #i1 #aiad4 #bef ,see ,bulletins of ,massachusetts ,minimum ,wage ,commission4 #beg ,see the excellent and varied series of papers on the subject in ,orth's ,the ,relation of ,government to ,property and ,industry1 pp4 #ajc-agh4 ,ginn ,company2 #aiae4 #beh ,the arguments for and against the constitutionality of a legal minimum wage are adequately presented in the briefs1 respectively1 of ,louis ,d4 ,brandeis and ,rome ,g4 ,brown1 in the cases of ,stettler vs4 ,o',hara and ,simpson vs4 ,o',hara4 ,the former is published by the ,national ,consumers' ,league1 ,new ,york1 and the latter by the ,review ,publishing ,company1 ,minneapolis4 #bei ,minimum ,rates in the ,tailoring ,industry1 p4 #afa4 #bfj ,one of the best statements of the economic aspect of the minimum wage is that by ,sidney ,webb1 in the ,journal of ,political ,economy1 ,dec41 #aiab4 ,probably the most varied and comprehensive general discussion is the symposium in the ,survey1 ,feb4 #f1 #aiae4 ,see especially the excellent presentation in ,commons and ,andrews' ,principles of ,labour ,legislation1 pp4 #afg-bjj4 #bfa ,see pages #cjc1 #cjd of ,a ,living ,wage2 ,macmillan1 #aijf4 #bfb ,o',grady1 ,a ,legal ,minimum ,wage2 ,washington1 #aiae4 #bfc ,final ,report1 pp4 #aja1 #bee1 #cfd4 #bfd ,the ,quarterly ,journal of ,economics1 ,may1 #aiaf4 ,a somewhat less unfavourable criticism is contained in the paper by ,professor ,john ,bates ,clark in the ,atlantic ,monthly1 ,september1 #aiac4 #bfe ,page #dcf4 #bff ,the ,wealth and ,income of the ,people of the ,united ,states1 p4 #abi4 #bfg ,page #dcg4 #bfh ,final ,report1 p4 #hjb4 ,washington1 #aijb4 #bfi ,see article by ,professor ,commons in ,the ,new ,encyclopedia of ,social ,reform1 p4 #abcc4 #bgj ,the ,quarterly ,journal of ,economics1 ,may1 #aiaf1 p4 #ejb4 #bga ,problems of ,poverty1 p4 #bbg4 ,london1 #ahia4 #bgb ,minimum ,rates in the ,tailoring ,industry1 p4 #if4 ,,chapter ,,xxvi ,,summary ,,and ,,conclusion ,throughout this book we have been concerned with a two-fold problem3 to apply the principles of justice to the workings of the present distributive system1 and to point out the modifications of the system that seemed to promise a larger measure of actual justice4 ,the mechanism of distribution was described in the introductory chapter as apportioning the national product among the four classes that contribute the necessary factors to the process of production1 and the first part of the problem was stated as that of ascertaining the size of the share which ought to go to each of these classes4 ,the ,landowner and ,rent ,we began this inquiry with the landowner and his share of the product1 i4e41 rent4 ,we found that private ownership of land has prevailed throughout the world with practical universality ever since men began to till the soil in settled communities4 ,the arguments of ,henry ,george against the justice of the institution are invalid because they do not prove that labour is the only title of property1 nor that men's equal rights to the earth are incompatible with private landownership1 nor that the so-called social production of land values confers upon the community a right to rent4 ,private ownership is not only socially preferable to the ,socialist and the ,single ,tax systems of land tenure1 but it is1 as compared with ,socialism certainly1 and as compared with the ,single ,tax probably1 among man's natural rights4 ,on the other hand1 the landowner's right to take rent is no stronger than the capitalist's right to take interest2 and in any case it is inferior to the right of the tenant to a decent livelihood1 and of the employ to a living wage4 ,nevertheless1 the present system of land tenure is not perfect4 ,its principal defects are3 the promotion of certain monopolies1 as1 anthracite coal1 steel1 natural gas1 petroleum1 water power1 and lumber2 the diversion of excessive gains to landowners1 as indicated by the recent great increases in the value of land1 and the very large holdings by individuals and corporations2 and the exclusion of large masses of men from the land because the owners will not sell it at its present economic value4 ,the remedies for these evils fall mainly under the heads of ownership and taxation4 ,all mineral1 timber1 gas1 oil1 grazing1 and water-power lands that are now publicly owned1 should remain the property of the states and the nation1 and be brought into use through a system of leases to private individuals and corporations4 ,cities should purchase land1 and lease it for long periods to persons who wish to erect business buildings and dwellings4 ,by means of taxation the ,state might appropriate the future increases of land values1 subject to the reimbursement of private owners for resulting decreases in value2 and it could transfer the taxes on improvements and personal property to land1 provided that the process were sufficiently gradual to prevent any substantial decline in land values4 ,in some cases the ,state might hasten the dissolution of exceptionally large and valuable estates through the imposition of a supertax4 ,the ,capitalist and ,interest ,the ,socialist contention that the labourer has a right to the entire product of industry1 and therefore that the capitalist has no right to interest1 is invalid unless the former alleged right can be effectuated in a reasonable scheme of distribution2 and we know that the contemplated ,socialist scheme is impracticable4 ,nevertheless1 the refutation of the ,socialist position does not automatically prove that the capitalist has a right to take interest4 ,of the titles ordinarily alleged in support of such a right1 productivity and service are inconclusive1 while abstinence is valid only in the case of those capital owners to whom interest was a necessary inducement for saving4 ,since it is uncertain whether sufficient capital would be provided without interest1 and since the legal suppression of interest is impracticable1 the ,state is justified in permitting the practice of taking interest4 ,but this legal permission does not justify the individual interest-receiver4 ,his main and sufficient justification is to be found in the presumptive title which arises out of possession1 in the absence of any adverse claimant with a stronger title to this particular share of the product4 ,the only available methods of lessening the burden of interest are a reduction in the rate1 and a wider diffusion of capital through co-operative enterprise4 ,of these the former presents no definite or considerable reasons for hope1 either through the rapid increase of capital or the inevitable extension of the industrial function of government4 ,the second proposal contains great possibilities of betterment in the fields of banking1 agriculture1 stores1 and manufacture4 ,through co-operation the weaker farmers1 merchants1 and consumers can do business and obtain goods at lower costs1 and save money for investment with greater facility1 while the labourers can slowly but surely become capitalists and interest-receivers1 as well as employs and wage-receivers4 ,the ,business ,man and ,profits ,just remuneration for the active agents of production1 whether they be directors of industry or employs1 depends fundamentally upon five canons of distribution2 namely1 needs1 efforts and sacrifices1 productivity1 scarcity1 and human welfare4 ,in the light of these principles it is evident that business men who use fair methods in competitive conditions1 have a right to all the profits that they can obtain4 ,on the other hand1 no business man has a strict right to a minimum living profit1 since that would imply an obligation on the part of consumers to support superfluous and inefficient directors of industry4 ,those who possess a monopoly of their products or commodities have no right to more than the prevailing or competitive rate of interest on their capital1 though they have the same right as competitive business men to any surplus gains that may be due to superior efficiency4 ,the principal unfair methods of competition2 that is1 discriminative underselling1 exclusive-selling contracts1 and discrimination in transportation1 are all unjust4 ,the remedies for unjust profits are to be found mainly in the action of government4 ,the ,state should either own and operate all natural monopolies1 or so regulate their charges that the owners would obtain only the competitive rate of interest on the actual investment1 and only such surplus gains as are clearly due to superior efficiency4 ,it should prevent artificial monopolies from practising extortion toward either consumers or competitors4 ,should the method of dissolution prove inadequate to this end1 the ,state ought to fix maximum prices4 ,inasmuch as overcapitalisation has frequently enabled monopolistic concerns to obtain unjust profits1 and always presents a strong temptation in this direction1 it should be legally prohibited4 ,a considerable part of the excessive profits already accumulated can be subjected to a better distribution by progressive income and inheritance taxes4 ,finally1 the possessors of large fortunes and incomes could help to bring about a more equitable distribution by voluntarily complying with the ,christian duty of bestowing their superfluous goods upon needy persons and objects4 ,the ,labourer and ,wages ,none of the theories of fair wages that have been examined under the heads of the prevailing rate1 exchange-equivalence1 or productivity is in full harmony with the principles of justice4 ,the minimum of wage justice can1 however1 be described with sufficient definiteness and certainty4 ,the adult male labourer has a right to a wage sufficient to provide himself and family with a decent livelihood1 and the adult female has a right to remuneration that will enable her to live decently as a self supporting individual4 ,at the basis of this right are three ethical principles3 all persons are equal in their inherent claims upon the bounty of nature2 this general right of access to the earth becomes concretely valid through the expenditure of useful labour2 and those persons who are in control of the goods and opportunities of the earth are morally bound to permit access thereto on reasonable terms by all who are willing to work4 ,in the case of the labourer1 this right of reasonable access can be effectuated only through a living wage4 ,the obligation of paying this wage falls upon the employer because of his function in the industrial organism4 ,and the labourer's right to a living wage is morally superior to the employer's right to interest on his capital4 ,labourers who put forth unusual efforts or make unusual sacrifices have a right to a proportionate excess over living wages1 and those who are exceptionally productive or exceptionally scarce have a right to the extra compensation that goes to them under the operation of competition4 ,labourers who are receiving the equitable minimum described in the last sentence have a right to still higher wages at the expense of the capitalist and the consumer1 if they can secure them through the processes of competition2 for the additional amount is an ethically unassigned or ownerless property which may be taken by either labourer1 capitalist1 or consumer1 provided that there is no artificial limitation of supply4 ,the methods of increasing wages are mainly three3 a minimum wage by law1 labour unions1 and co-operative enterprise4 ,the first has been fairly well approved by experience1 and is in no wise contrary to the principles of either ethics1 politics1 or economics4 ,the second has likewise been vindicated in practice1 though it is of only small efficacy in the case of those workers who are receiving less than living wages4 ,the third would enable labourers to supplement their wage incomes by interest incomes1 and would render our industrial system more stable by giving the workers an influential voice in the conditions of employment1 and laying the foundation of that contentment and conservatism which arise naturally out of the possession of property4 ,as a matter of convenience1 the foregoing paragraphs may be further summarised in the following abridgment3 ,the landowner has a right to all the economic rent1 modified by the right of his tenants and employs to a decent livelihood1 and by the right of the ,state to levy taxes which do not substantially lower the value of the land4 ,the capitalist has a right to the prevailing rate of interest1 modified by the right of his employs to the equitable minimum of wages4 ,the business man in competitive conditions has a right to all the profits that he can obtain1 but corporations possessing a monopoly have no right to unusual gains except those due to unusual efficiency4 ,the labourer has a right to living wages1 and to as much more as he can get by competition with the other agents of production and with his fellow labourers4 ,concluding ,observations ,no doubt many of those who have taken up this volume with the expectation of finding therein a satisfactory formula of distributive justice1 and who have patiently followed the discussion to the end1 are disappointed and dissatisfied at the final conclusions4 ,both the particular applications of the rules of justice and the proposals for reform1 must have seemed complex and indefinite4 ,they are not nearly so simple and definite as the principles of ,socialism or the ,single ,tax4 ,and yet1 there is no escape from these limitations4 ,neither the principles of industrial justice nor the constitution of our socio-economic system is simple4 ,therefore1 it is impossible to give our ethical conclusions anything like mathematical accuracy4 ,the only claim that is made for the discussion is that the moral judgments are fairly reasonable1 and the proposed remedies fairly efficacious4 ,when both have been realised in practice1 the next step in the direction of wider distributive justice will be much clearer than it is to-day4 ,although the attainment of greater justice in distribution is the primary and most urgent need of our time1 it is not the only one that is of great importance4 ,no conceivable method of distributing the present national product would provide every family with the means of supporting an automobile1 or any equivalent symbol of comfort4 ,indeed1 there are indications that the present amount of product per capita cannot long be maintained without better conservation of our natural resources1 the abandonment of our national habits of wastefulness1 more scientific methods of soil cultivation1 and vastly greater efficiency on the part of both capital and labour4 ,nor is this all4 ,neither just distribution1 nor increased production1 nor both combined1 will insure a stable and satisfactory social order without a considerable change in human hearts and ideals4 ,the rich must cease to put their faith in material things1 and rise to a simpler and saner plane of living2 the middle classes and the poor must give up their envy and snobbish imitation of the false and degrading standards of the opulent classes2 and all must learn the elementary lesson that the path to achievements worth while leads through the field of hard and honest labour1 not of lucky deals or gouging of the neighbour1 and that the only life worth living is that in which one's cherished wants are few1 simple1 and noble4 ,for the adoption and pursuit of these ideals the most necessary requisite is a revival of genuine religion4 ,,index ,abstinence3 as a title to interest1 #ahb-ahf4 ,adams1 ,t4 ,s43 #cja1 #cjb4 ,adam ,smith3 #cca1 #cda4 ,agriculture3 co-operation in1 #bag-bbj4 ,alaska3 leasing system in1 #if4 ,altruism3 efficacy of under ,socialism1 #afe-afg2 promoted by co-operation1 #bbi4 ,ambrose1 ,saint3 #cje4 ,american ,sugar ,refining ,company3 #bfg1 #bgb1 #bhi4 ,american ,tobacco ,company3 #bfc1 #bfg1 #bhh4 ,analogy3 economic1 as justifying interest1 #bje1 #bjf4 ,anthracite coal3 a monopoly1 #ge1 #gh1 #ie1 #acb4 ,antoine1 ,charles3 #ccg-cdj4 ,antoninus1 ,saint3 #bgj4 ,aquinas1 ,saint ,thomas3 #fc1 #fd1 #age1 #aha1 #bjh1 #cjd1 #cjf1 #cjg1 #ccc4 ,arbitration3 failure of1 #cbd4 ,ashley1 ,w4 ,j43 #i4 ,astor estate3 #hh1 #hi4 ,augustine1 ,saint3 #cje4 ,australasia3 special land taxes in1 #aah-abj1 #aca2 minimum wage in1 #dja1 #djb4 ,authorities3 ,catholic and ,protestant1 on living wage1 #bgg1 #bgh4 ,basil1 ,saint3 #cje4 ,bible1 the3 on the duty of benevolence1 #cjc1 #cjd1 #caf1 #cag4 ,brandeis1 ,louis ,d43 #bfe1 #bge4 ,business man3 functions and rewards of1 #bcg-bci1 #bee-beh2 no right of to minimum profits1 #beh-bfj1 #cfb1 #cfc2 the superfluous1 #bfj1 #bfa4 ,canada3 special land taxes in1 #aag-abj4 ,canonist3 doctrine of wage justice1 #ccc-ccf4 ,canons of distributive justice3 #bdc-bec4 ,capital3 meaning of1 #acg1 #ach2 power of to create value1 #adf-adh2 ,catholic teaching concerning interest on1 #age-agg2 titles of to interest1 #agg-ahf2 value of in a no-interest rgime1 #ahh-aij2 need for a wider distribution of1 #bac1 #bad2 need for ownership of by labour1 #bad1 #bbi1 #bcj4 ,capitalists3 two kinds of1 #ach2 expropriation of1 #aed-aeh2 right of to take interest1 #bja-bji2 claims of1 versus claims of labourers1 #cfg-cfi1 #cij-cic1 #cif4 ,carnegie1 ,andrew3 #cjj4 ,carver1 ,t4 ,n43 #cea-cee4 ,catholic ,church3 attitude of toward interest1 #agb-agf4 ,child workers3 right of to a living wage1 #cgc4 ,christian conception of welfare3 #caf-cah4 ,clark1 ,j4 ,b43 #bga1 #cdg-cea4 ,compensation3 to landowners1 #cd-ci2 to capitalists under ,socialism1 #aed-aeh4 ,competition3 alleged failure of1 #bge-bgh4 ,confiscation3 of land values under the ,single ,tax1 #cd-ci2 of capital under ,socialism1 #aed-aeh2 of wealth by taxation1 #big1 #bih4 ,constitutionality of minimum wage laws3 #dje-djg4 ,consumer3 injury to through stockwatering1 #bhb-bhh2 obligations of to business man1 #beh1 #bei1 #cfb1 #cfc2 versus labourer1 #cic-cih4 ,contract3 onerous1 #cbf2 free1 as a rule of wage justice1 #cbh-ccj1 #cgj-cgb4 ,co-operation3 as a partial solvent of capitalism1 #baj-bcc2 essence and kinds of1 #bad1 #bae2 in banking1 #baf1 #bag2 in agriculture1 #bag-bbj2 in stores1 #bbj-bbb2 in production1 #bbb-bbh2 effect of on social stability1 #bbi1 #bcj2 as compared with individualism and ,socialism1 #bcj1 #bca2 province and limitations of1 #bca-bcc2 bearing of on the superfluous business man1 #bfj1 #bfa2 and on the labouring classes1 #dbc-dbe4 ,co-partnership3 #bbc1 #bbd4 ,corporation3 profits of a1 #bda1 #bdb1 #beg1 #beh1 #bfb1 #chi4 ,cost of living3 #cgh1 #cgi4 ,cost of production3 of capital1 #ahh1 #ahi4 ,credit societies3 co-operative1 #baf1 #bag4 ,defects of our land system3 #gd-ic2 monopoly1 #ge-hj2 excessive gains1 #hj-hi2 exclusion1 #ij-ic4 ,devas1 ,charles3 #ahd4 ,disagreeable tasks3 #chd1 #che4 ,dixon1 ,f4 ,h43 #cbc4 ,discriminative transportation contracts3 #bgb1 #bgc4 ,discriminative underselling3 #bfg-bgj4 ,distribution of superfluous wealth3 #cjc-cai4 ,distributive justice3 canons of1 #bdc-bec1 #cha1 #chb4 ,earth3 right of access to1 #ceh-cfj4 ,economic determinism3 inconsistent with ethical judgments1 #bj1 #ade1 #adf1 #cdc1 #cdd4 ,efficiency3 monopolistic1 #bfe-bfg1 #bge-bgg1 #bgi2 exceptional1 #chh-cij4 ,efforts3 exceptional1 as claim to rewards1 #chb-chc4 ,efforts and sacrifices3 as canons of distribution1 #bde-bdg4 ,ely1 ,r4 ,t43 #ccj4 ,employer3 gains of from wage contract1 #cbg1 #cbh2 obligation of to pay a living wage1 #cfe-cgb4 ,engels1 ,f43 #bj4 ,ensor1 ,e4 ,k43 #ej4 ,equal gains3 as a canon of wage justice1 #cbf-cbh4 ,equality3 as a canon of justice1 #bdc1 #bdd2 of men's claims to the bounty of nature1 #ceh1 #cei2 of rights to a decent livelihood1 #cfj-cfc4 ,equitable minimum3 of wages1 #chh1 #cij1 #cib1 #cic1 #cie1 #cig1 #cih1 #cii1 #dag4 ,equity3 meaning of1 #bef4 ,exchange-equivalence3 theories of1 #cbf-cdj2 equal gains1 #cbf-cbh2 free contract1 #cbh-ccj2 market value1 #ccj-ccb2 medival1 #ccb-ccf2 modern1 #ccf-cdj4 ,exclusion from the land3 #ij-ic4 ,exclusive-sales contracts3 #bgj-bgb4 ,expropriation3 of capitalists under ,socialism1 #aed-aeh4 ,extrinsic titles3 of interest1 #agb4 ,family living wage3 #cgc-cgf4 ,fathers of the ,church3 on private property in land1 #fb2 on duty of beneficence1 #cje1 #cjf4 ,fay1 ,c4 ,r43 #bad1 #bba1 #bbg4 ,fisher1 ,irving3 #aif4 ,fortunes3 legal limitation of1 #bia-cjb2 directly1 #bib-bie2 by taxation1 #bif-cjb4 ,france3 co-operative production in1 #bbc4 ,fustel de ,coulanges3 #i4 ,gains3 excessive from land1 #hj-hi2 from monopolies1 #bfc-bfe4 ,germany3 co-operation in1 #baf4 ,giffen1 ,sir ,robert3 #ahi4 ,godwin1 ,w43 #cda4 ,government ownership3 #ic-ie2 limitations of1 #afc-afe2 and rate of interest1 #bab4 ,great ,britain3 co-operation in1 #bbj-bbb2 income taxes in1 #bii-cjj2 minimum wage in1 #dja1 #djb4 ,haines1 ,h4 ,t43 #dje4 ,hammond1 ,m4 ,b43 #djb4 ,henry ,george3 on primitive common ownership1 #ag2 on first occupancy1 #ba-bd2 on title of labour1 #bd-bi2 on natural right to land1 #cj-ci2 on right of community to land values and rent1 #ci-dg2 on ,single ,tax1 #ea1 #eb4 ,hillquit1 ,morris3 #aei4 ,hobson1 ,j4 ,a43 #dah4 ,howe1 ,f4 ,c43 #gf-gh4 ,human welfare3 the test of property rights in land1 #cf-ch2 and of a system of land tenure1 #gd2 and of increment taxes1 #aji-aaa2 and of titles of property1 #aej1 #aea1 #bdd1 #bic-bie2 as a canon of distributive justice1 #beb1 #bec2 as justifying profits1 #bef1 #beg1 #chi2 as justifying higher than living wages1 #chf4 ,hyndman and ,morris3 #bj4 ,income3 distribution of national1 #ha-hc4 ,incomes3 injustice of equal1 #bdd2 progressive taxation of1 #big-cjb4 ,increment taxes3 #ajb-aag4 ,inefficiency3 of leadership and labour under ,socialism1 #aeh-afh4 ,inheritance3 legal limitation of1 #bic-bie2 progressive taxation of1 #bif-cjb4 ,interest3 nature of1 #acg-adj2 rate of1 #ada-add2 alleged intrinsic justifications of1 #aga-ahf2 attitude of ,church toward1 #agb-agf2 extrinsic titles of1 #agb2 and the title of productivity1 #agf-aha2 and the title of service1 #aha1 #ahb2 and the title of abstinence1 #ahb-ahf2 social and presumptive justifications of1 #ahg-bji2 necessity of1 #aia-aii2 civil authorization1 #bja-bjd2 how justified1 #bjd-bji1 a workless income1 #baj2 possibility of reducing rate1 #baa-bac2 distinguished from profits1 #bch1 #bci2 versus wages1 #cij-cic4 ,investor3 the innocent1 #bhf1 #bhg4 ,ireland3 reduction of rents in1 #fi-ga2 compulsory sale of land in1 #aaj2 co-operation in1 #bag-bai4 ,italy3 co-operation in1 #bbc4 ,justice3 dependence of on charity1 #cah2 not found in prevailing-rate theory1 #cbe2 nor in exchange equivalence theories1 #cbf-cdj2 nor in productivity theories1 #cdj-cee2 and the wage contract1 #cgj-cgb2 and the legal minimum wage1 #djg4 ,kautsky1 ,karl3 #aec4 ,king1 ,w4 ,i3 #hb1 #hc1 #abb1 #abc1 #aee1 #bdj1 #caj1 #dad4 ,labour3 as a title to land1 #bd-bi2 and to products1 #de2 and to the entire product of industry1 #ade-aeb2 #cda-cdg2 productivity of1 #agh1 #agi2 inefficiency of under ,socialism1 #afb-afg2 medival measure of cost of1 #ccf1 #ccg2 claims of different groups of1 #cha-chg2 legislative proposals for1 #daf1 #dag4 ,labour unions3 efficacy and limitations of1 #dag-dbj2 and legislation1 #dbj-dbc4 ,labourer1 the3 claim of to rent1 #ga-gc2 right of to his product1 #be1 #bf1 #bh1 #dc1 #de1 #adi1 #aej1 #agi1 #ahj2 gains of from wage contract1 #cbg1 #cbh2 right of to a living wage1 #cfc-cfi1 #cgc2 versus the capitalist1 #cij-cic1 #cif2 versus the consumer1 #cic-cih2 and co-operative enterprise1 #dbc-dbe4 ,land3 distribution of1 #af1 #ag1 #hg-hi2 large holdings of1 #hi1 #ij2 accessibility to1 #ia-ie2 the leasing system1 #ie-ig2 public ownership of1 #ih-ajj4 ,landowner3 right of to rent1 #fg-gc2 his share of product1 #hj-hi4 ,landownership3 in history1 #h-ah2 two theories of1 #h1 #i2 in pre-agricultural conditions1 #aj-ab2 origin of private1 #ab-ad2 prevalence and benefits of1 #ae-ah2 arguments against private1 #ai-dg1 by ,socialists1 #ai-ba1 by ,henry ,george1 #ba-dg2 private1 the best system of tenure1 #dh-ee2 four elements of1 #dh2 a natural right1 #ee-ef4 ,see ,henry ,george1 ,occupancy1 ,labour1 ,right1 ,compensation1 ,confiscation1 ,defects1 ,rent4 ,land ,system3 defects of the existing1 #gd-ic4 ,land values3 how created by the community1 #dj-dg2 increase of1 #hc-hf2 taxation of1 #aag-acj4 ,langenstein3 #cce4 ,lassalle1 ,f43 #ahc4 ,large estates3 special taxation of1 #acj-acb4 ,leadership3 industrial1 under ,socialism1 #aeh-afg4 ,leasing system3 #ie-ig4 ,legislation3 for labour1 #abj-abc1 #daf4 ,liberty3 under ,socialism1 #afh-agj4 ,liebknecht1 ,w43 #aeb4 ,life3 right to1 #eg2 true conception of1 #cag4 ,limitation of fortunes3 #bia-cjb2 directly1 #bib-bie2 by taxation1 #bif-cjb4 ,livelihood1 decent3 #cfj-cfc2 the labourer's right to1 #cfc-cfe2 the employer's1 #cff4 ,living wage3 the minimum of wage justice1 #cef-chj2 three fundamental principles1 #ceh-cfj2 and a decent livelihood1 #cfj-cfc2 right of labourer to1 #cfc-cfi2 obligation of employer to pay1 #cfe-cgb2 for a family1 #cgc-cgf2 and social welfare1 #cgf1 #cgg2 authorities for1 #cgg1 #cgh2 money measure of1 #cgh-chj2 versus other titles of reward1 #cha1 #chb1 #chf4 ,loan capitalist3 and the claims of the labourer1 #cff1 #cfg1 #cij1 #cia4 ,loans3 attitude of ,church toward interest on1 #agb-agd2 and productive capital1 #agd1 #age4 ,maine1 ,sir ,henry3 #ag4 ,market value3 and wage justice1 #ccj-ccb1 #cgj1 #cge4 ,marriage3 right to1 #eg1 #eh2 and reasonable life1 #cgd4 ,marx1 ,karl3 #ade-adh1 #cdb1 #cdc1 #cgd4 ,materialism3 in current conception of welfare1 #cad-cah4 ,meade1 ,e4 ,s43 #bfe1 #bff4 ,menger1 ,a43 #cdb4 ,middle ,ages1 doctrines of3 on interest1 #agb1 #age1 #agf1 #bja2 on titles of gain1 #age2 on wage justice1 #ccb-ccf4 ,minimum3 of wage justice1 #cef-chj4 ,minimum profits3 question of right to1 #beh-bfj4 ,minimum wage3 #cec-cee1 #djj-dbc2 in operation1 #djj-dje2 ethical and political aspects of1 #djg1 #djh2 economic aspect of1 #djh-daf2 opinions of economists on1 #dab-daf1 #dbj-dbc4 ,modern3 version of exchange-equivalence1 #ccf-cdj4 ,monopoly3 in relation to land1 #ge-hj2 moral aspect of1 #bfb-bgh2 excessive gains of1 #bfc-bfe2 efficiency of1 #bfe-bfg1 #bge-bgg2 discriminative underselling by1 #bfg-bgj2 favors to by railroads1 #bfb1 #bgc2 natural1 #bgc-bge2 suppression versus regulation of1 #bge-bgh2 by labour1 #cij1 #cig4 ,natural monopolies3 #bgc-bge4 ,natural rights3 #eg-ei4 ,see ,rights4 ,nearing1 ,scott3 #hc-he2 #aed1 #baj1 footnote4 ,needs3 as a canon of justice1 #bdd1 #bdf1 #cef-ceh2 classification of1 #cjh1 #cji2 exaggerated conception of1 #cad-cah2 a standard of wage justice in ,middle ,ages1 #cce1 #ccf4 ,occupancy1 first3 as a title to land1 #ba-bd2 as exemplified in increment taxes1 #aji4 ,occupation3 question of right to a livelihood from a present1 #cfb1 #cfc4 ,original titles3 ,see ,occupancy1 ,labour4 ,overcapitalization3 #bgi-bij4 ,see ,stockwatering4 ,ownership3 titles of determined by reasonable distribution1 #aej1 #aea4 ,perkins1 ,g4 ,w43 #bgf4 ,personality3 as basis of industrial rights1 #ceh-cga1 #cgd4 ,pesch1 ,h43 #bae4 ,pope ,benedict ,,xiv3 #agc4 ,clement ,,iv3 #bc4 ,gregory the ,great3 #cjf4 ,innocent ,,xi3 #caf4 ,leo ,,xiii3 #fd-ff1 #cjf1 #cji1 #cgg4 ,sixtus ,v3 #agf4 ,population3 excessive increase of urban1 #hf4 ,possession3 as a partial justification of interest3 #bje1 #bjf4 ,possessors3 obligation of to non-possessors1 #cei1 #cfj4 ,presumption3 as a partial justification of interest1 #bje2 and the canon of productivity1 #bdh4 ,prevailing rate theory3 of wage justice1 #cbc-cbe4 ,prices3 test of extortionate1 #bfi1 #bgj2 legalized agreements fixing1 #bgg1 #bgh2 versus wages1 #cic-cii4 ,principles3 three fundamental to living wage doctrine1 #ceh-cfj4 ,product3 distribution of national1 #aha-ahc4 ,see ,labour1 ,labourer1 ,right4 ,production3 of land values by the community1 #ci-dg2 co-operation in1 #bbb-bbh4 ,productivity3 as a title to the product1 #be1 #bf1 #bh1 #dc1 #de1 #adi1 #aej1 #agi2 as a title to interest1 #agb1 #agc1 #agf-aha1 #bjd1 #bje2 of labour and capital1 #agh-ahj2 as a canon of distribution1 #bdf-bdi1 #cej1 #cea2 as justifying large profits1 #bee-beh1 #bfb1 #chh1 #chi2 as a title to wages1 #cda-cee1 #che2 ,clark's theory of1 #cdg-cea2 ,carver's theory of1 #cea-cee4 ,profits3 nature of1 #bcg-bdb2 as compared with interest and rent1 #aci1 #adj1 #bch1 #bci2 amount of1 #bci1 #bdj2 in a corporation1 #bda1 #bdb2 in conditions of competition1 #bed-bfa2 indefinitely large1 #bee-beh2 minimum1 #beh-bfj2 surplus and excessive1 #bfc-bfe2 in natural monopolies1 #bgc1 #bgd2 versus wages1 #chh-cij4 ,progress and ,poverty3 #ba1 #bb1 #bd1 #be1 #cj1 #cd1 #ci1 #ea1 #eb4 ,proudhon3 #cdb4 ,public honour3 efficacy of under ,socialism3 #afe-afg4 ,pullman ,company3 #bhi4 ,reform3 versus revolution1 #id4 ,rent3 economic1 #c-g2 commercial1 #e2 how produced by society1 #ci-dg2 right of landowner to1 #fg-ge2 right of tenant and labourer to1 #fi-gc1 #cif2 increase and amount of1 #hj-hg2 distribution of1 #hg-hi2 in ,united ,states1 #abb4 ,rent charges3 attitude of theologians toward1 #age1 #agf4 ,res fructificat domina3 limitations of this formula1 #fj1 #fa1 #ajd1 #aje1 #aaa1 #ahj1 #cde4 ,revolution3 versus reform1 #id4 ,riches3 from land1 #hh1 #hi4 ,right3 of the individual to land1 #cj-ci2 of the community to land values and rent1 #ci-dg2 of the producer to his product1 see productivity2 of private landownership1 #ef-ff2 to take rent1 #fg-gc2 of access to the earth1 #ceh-cfj2 to a decent livelihood1 #cfj-cfc2 to a living wage1 #cfc-cfi1 #cgb1 #cgf4 ,rights3 three principal kinds of natural1 #eg-ei2 of property1 as created by the ,state1 #bjb4 ,rodbertus1 ,k43 #cdb4 ,roman ,congregations3 on lawfulness of interest taking1 #agc1 #agd4 ,saint-,simon3 #cdb4 ,sacrifice3 principle of in taxation1 #aca1 #big2 as a title to interest1 #ahe-ahh2 as a title of reward1 #chc-che4 ,savers3 three kinds of1 #ahc-ahe4 ,scarcity3 effect of on rewards of productive agents1 #hj2 as a canon of distributive justice1 #bej1 #bea2 as justifying very large profits1 and more than a living wage1 #bee-beh4 ,schmoller3 #bec4 ,schoolmen3 doctrines of on wage justice1 #ccc-ccf4 ,seligman1 ,e4 ,r4 ,a43 #aja1 #bif1 #big4 ,service3 as a title to interest1 #aha1 #ahb1 #bjd1 #bje4 ,shifting3 of land taxes1 #ajb1 #ajc4 ,sidgwick1 ,h43 #cbi4 ,single ,tax3 injustice of1 #cc-ci1 #ajj2 proposals and defects of1 #ea1 #ed1 #ajh4 ,skelton1 ,o4 ,d43 #afe4 ,small1 ,a4 ,w43 #aga4 ,social benefits3 of special taxes on land1 #abg-acj4 ,socialism3 as regards land1 #di1 #ea2 not inevitable1 #aec2 expropriation of capitalists by1 #aed-aeh2 inefficiency of1 #aeh-afh2 hostile to individual liberty1 #afh-agj2 not co-operation1 #bcj1 #bca4 ,socialists3 on private landownership1 #ai-ba2 on interest1 value1 and labour1 #ade-adh2 on the collectivist ,state1 #aeb1 #aec2 on morality of profits1 #bed2 on wage justice1 #cda-cdg2 on the principle of needs1 #cef4 ,socialist party3 of the ,united ,states1 on landownership1 #ea4 ,spargo1 ,john3 #ea4 ,specific productivity3 as a measure of wage justice1 #cdg-cea4 ,speculation3 effect of on land values1 #ib1 #ic1 #ajc4 ,spencer1 ,herbert3 #bc4 ,standard ,oil ,company3 #gf1 #bfc1 #bfg4 ,state1 the3 should permit interest1 #aii-bja2 power of to create property rights1 #bjb-bjd2 not obliged to guarantee living profits1 #bei2 fixing of maximum prices by1 #bge-bgh2 and the innocent investor1 #bhf1 #bhg2 and the prevention of stockwatering1 #bhi1 #bij2 and the limitation of fortunes1 #bia-cjb2 and payment of living wages1 #cfe2 and minimum wage1 #djg1 #djh1 #dbj-dbc2 and other labour legislation1 #daf1 #dag4 ,stockholders3 claim of to surplus gains1 #beg1 #beh1 #bfb2 as related to stockwatering1 #bgi-bha1 #bhe4 ,stockwatering3 moral aspect of1 #bgi-bij2 definition of1 #bhj2 injurious effects of1 #bha-bhf and the innocent investor1 #bhf1 #bhg2 magnitude of1 #bhh1 #bhi2 prevention of1 #bhi1 #bij4 ,stores3 co-operation in1 #bbj-bbb4 ,superfluous wealth3 duty of distributing1 #cjc-cai2 kinds of1 #cjh1 #cji2 a false conception of1 #cad-caf2 true conception of1 #cah1 #cai4 ,see ,wealth4 ,supertax3 on large landed estates1 #acj-acb4 ,supply and demand3 as determining rent1 #hj2 as determining interest1 #adc1 #add4 ,taussig1 ,f4 ,w43 #aih1 #bad1 #bhb1 #bhi1 #bij2 on minimum wage1 #dab-daf4 ,tawney1 ,r4 ,h43 #dba4 ,taxation3 as a social instrument1 #aja1 #ajb2 of increases in land value1 #ajb-aag2 faculty theory of1 #ajg1 #ajh2 progressive1 as a method of limiting fortunes1 #bif-cjb4 ,taxes3 shifting of to land1 #aag-acj2 social benefits of1 #abg-acj4 ,tenant3 claim of to rent1 #fi-ga4 ,theologians3 on private landownership1 #fb-fd2 on interest1 #agb-agf1 #bjb-bjd2 on civil creation of property rights1 #bjb2 on duty of benevolent distribution1 #cjh1 #cji4 ,thompson1 ,w43 #cda4 ,undertaker3 ,see ,business man4 ,united ,states3 special land taxes in1 #aai2 co-operation in1 #bah1 #bfc2 minimum wage in1 #dja1 #djc-djg4 ,united ,states ,commissioner of ,corporations1 reports of3 on ,standard ,oil ,company1 #gf1 #bfc1 #bfg1 #bfh1 #bgb2 on ,steel ,corporation1 #gi1 #hi1 #bfc1 #bfg1 #bhe2 on water power ownership1 #gi1 #ie2 on the lumber industry1 #he1 #hi1 #id1 #acb2 on ,american ,tobacco ,company1 #bfc1 #bfg1 #bhh2 on ,american ,sugar ,refining ,company1 #bfg1 #bgb1 #bhi4 ,united ,states ,shipbuilding ,company3 #bhh1 #bhi4 ,united ,states ,steel ,corporation3 #gi1 #hi1 #bfg1 #bhe1 #bhi4 ,use3 right1 as a confirmatory justification of interest taking1 #bjf-bjh4 ,value3 ,marxian theory of1 #ade-adh1 #ccc1 #cdc1 #cdd2 relation of to wage justice1 #ccj-cdj2 and to a living wage1 #cgj1 #cge4 ,van ,hise1 ,c4 ,r43 #bff1 #bfg1 #bgg1 #bgh1 #bhh4 ,wage justice3 unacceptable theories of1 #cbc-cee2 prevailing rate theory1 #cbc-cbe2 exchange equivalence theory1 #cbf-cdj2 productivity theories1 #cda-cee2 the minimum of1 #cef-chj2 problem of complete1 #cha-cii2 claims of different labour groups1 #cha-chg2 wages versus profits1 #chh-cij2 wages versus interest1 #cij-cic2 wages versus prices1 #cic-cii4 ,wages3 versus profits1 #chh-cij2 equitable minimum of1 #chh2 versus interest1 #cij-cic2 versus prices1 #cic-cii2 methods of increasing1 #djj-dbe2 legal minimum1 #djj-daf2 other legislation for1 #daf1 #dag2 labour unions1 #dag-dbc2 co-operative enterprise1 #dbc-dbe4 ,wagner1 ,a43 #cdb4 ,watered stock3 #bgi-bij4 ,see ,stockwatering4 ,water power3 in the ,united ,states1 #gi1 #ie4 ,wealth1 superfluous3 duty of distributing1 #cjc-cai2 as regards a part1 #cjc-cjg2 as regards the whole1 #cjh-cad2 a duty of charity or of justice1 #cje-cjg2 the supply of capital and business ability1 #caa-cac2 false and true conceptions of1 #cad-caf4 ,welfare3 a false conception of1 #cad-caf2 true conception of1 #caf-cah2 social1 demands a living wage for all1 #cgf1 #cgg4 ,see ,human welfare4 ,whittaker1 ,sir ,thomas3 #aj1 #ad1 #bh4 ,wicker1 ,g4 ,r43 #cej1 #cea4 ,williams1 ,a43 #bcb4 ,wolman1 ,l43 #dag1 #dah4 ,women3 right of to a living wage1 #cgc4 ,,printed ,,in ,,the ,,united ,,states ,,of ,,america 99 99 99 99 99 ,the following pages contain advertisements of books by the same author or on kindred subjects4 99 99 99 99 99 ,socialism3 ,promise or ,menace ,,by ,,morris ,,hillquit and ,,john ,a4 ,,ryan1 ,d4,d4 #bgj pp41 #abmo1 #a4be ,a debate on the right or wrong of the movement in which opposing arguments are presented dealing with various phases of the subject4 ,the attack is made by ,dr4 ,ryan1 ,professor of ,moral ,theology and ,economics in ,st4 ,paul ,seminary and author of ,a ,living ,wage4 ,the defender1 ,mr4 ,hillquit1 is a practising lawyer and has been a delegate to national and international socialist conferences for several years4 ,one of the most important books ever published1 bearing on the issue of ,socialism4--,ohio ,state ,journal4 ,many books have been written on the subject1 but no better presentation of both sides in one volume can be found than in ,socialism1 ,promise or ,menace4444 ,it is a fine1 fair and square discussion4--,congregationalist4 ,nowhere else within the covers of a single volume can be found such a satisfactory presentation of the leading arguments and counter-arguments on a great question1 for each debater is amply qualified to present his case4--,boston ,globe4 99 99 99 99 99 ,a ,living ,wage1 ,its ,ethical and ,economic ,aspects ,by ,,john ,a ,,ryan1 ,s4,t4,l4 ,professor of ,ethics and ,economics in ,st4 ,paul's ,seminary4 ,cloth1 #abmo1 #a4jj2 ,standard ,library ,edition1 4#ej ,father ,ryan's work on the ,living ,wage is perhaps the best exposition of the labor phase of the social problem4 ,it has taken its place on the shelves of public and private libraries beside other standard works1 while the name of the author is associated with the leading ,american sociologists4 ,the volume is prefaced by an introduction by ,professor ,richard ,t4 ,ely1 the noted ,american economist4 ,as the title indicates1 the subject is not merely treated from an economic point of view1 but also in its economic aspects--a course of procedure that is somewhat of a departure from prevailing discussions of economic subjects4 ,there is a tendency to treat political economy as a subject related to mathematics4 ,statistics and axioms are the predominating features4 ,however1 the science of political economy cannot disregard the origin and destiny of man4 ',the ,living ,wage' is based on the principles of ,christian philosophy4 ,its logic proceeds from the ,christian conception of the dignity of man4 ,father ,ryan's book is thus a most timely and necessary contribution to sociological literature4 ,that ',the ,living ,wage' has met the popularity that it has1 is evidence of the growing conviction that the social problem cannot be solved except on ,christian principles4--,common ,cause4 ,it is refreshing to pick up a book by ,dr4 ,ryan1 who is always so sane and so convincing4--,north ,western ,chronicle4 ,the book is considered the best presentation of ,catholic economic thought at the disposal of the general reader4--,albany ,times-,union4 ,that this economic study by ,father ,ryan is a solid work is evidenced by the fact that it was first published in #aijf1 and was reprinted in #aijh1 #aiaj1 and #aiab4444 ,instead of appeals to sentiment or glittering generalities1 ,professor ,ryan offers seasoned arguments and precise doctrine4--,portland ,evening ,telegram4 ,the most judicious and balanced discussion at the disposal of the general reader4--,world ,to-day4 99 99 99 99 99 ,property and ,contract in ,their ,relations to the ,distribution of ,wealth ,by ,,richard ,t4 ,,ely1 ,ph4,d41 ,,ll4,d4 ,of the ,university of ,wisconsin1 ,author of ,outlines of ,economics1 ,editor of the ,citizens' ,library1 etc4 ,in two volumes1 #d4jj4 ,special ,law ,library ,edition1 ,sheep1 #hvo1 #g4ej ,in this work1 which is based upon legal decisions as well as upon economic principles1 a leading authority on political economy considers simply and concisely one of the greatest problems now before the ,american people4 ,much has been heard and written of late about judicial readjustment and direct government1 but few who have discussed the subject have seen the heart of it as clearly as does ,professor ,ely4 ,of special importance is his treatment of the police power1 a burning question in ,american jurisprudence4 ,an idea of the scope and comprehensiveness of the work may be gained from the following condensed table of contents3 ,introduction2 ,book ,i1 ,the ,fundamentals in the ,existing ,socio-,economic ,order ,treated from the ,standpoint of ,distribution2 ,part ,i1 ,property1 ,public and ,private3 ,i1 ,property1 ,public and ,private1 ,the ,first ,fundamental ,institution in the ,distribution of ,wealth2 ,,ii1 ,illustrations ,showing the ,importance of ,property in ,wealth ,distribution2 ,,iii1 ,property ,defined and ,described2 ,,iv1 ,property1 ,possession1 ,estate1 ,resources2 ,v1 ,the ,attribute and ,characteristic of ,property2 ,,vi1 ,the ,social ,theory of ,private ,property2 ,,vii1 ,property and the ,police ,power2 ,,viii1 ,what ,may ,i ,own8 ,,ix1 ,the ,conservative ,nature of the ,social ,theory of ,property2 ,x1 ,,xi1 ,a ,discussion of the ,kinds of ,property2 ,,xii1 ,the ,general ,grounds for the ,maintenance of ,private ,property2 ,,xiii1 ,a ,critical ,examination of the ,general ,grounds for the ,maintenance of ,private ,property2 ,,xiv1 ,,xv1 ,,xvi1 ,,xvii1 ,,xviii1 ,,xix1 ,the ,present and ,future ,development of ,private ,property2 ,,xx1 ,the ,transformation of ,public ,property into ,private ,property and of ,private ,property into ,public ,property2 ,,xxi1 ,the ,management of ,public ,property with ,reference to ,distribution2 ,,xxii1 ,theories of the ,origin of ,private ,property2 ,part ,,ii1 ,contract and ,its ,conditions3 ,i1 ,introductory ,observations2 ,,ii1 ,contract ,defined and ,described2 ,,iii1 ,the ,economic ,significance of ,contract2 ,,iv1 ,contract and ,individualism2 ,v1 ,criticism of the ,individualistic ,theory of ,contract and the ,social ,theory2 ,,vi1 ,contracts for ,personal ,services2 ,,vii1 ,class ,legislation2 ,,viii1 ,facts as to ,impairment of ,liberty2 ,,ix1 ,the ,courts and ,constitutions2 ,x1 ,concluding ,observations2 ,appendix ,i1 ,part ,,iii1 ,vested ,interests2 ,appendix ,,ii1 ,part ,,iv1 ,personal ,conditions2 ,appendix ,,iii1 ,production1 ,present and ,future1 by ,w4 ,i4 ,king1 ,ph4,d41 ,instructor in ,statistics1 ,university of ,wisconsin2 ,appendix ,,iv1 ,list of ,cases ,illustrating the ,attitude of the ,courts ,toward ,property and ,contract ,rights and the ,consequent ,evolution of ,these ,rights1 by ,samuel ,p4 ,orth1 ,ph4,d41 ,professor of ,political ,science1 ,cornell ,university4 99 99 99 99 99 ,principles of ,economics ,,by ,f4 ,w4 ,,taussig ,henry ,lee ,professor of ,economics in ,harvard ,university ,new edition4 ,cloth1 #hvo1 #b vols41 each #b4jj ,volume ,i1 #edg pages ,volume ,,ii1 #egc pages ,the present edition of ,professor ,taussig's standard work embodies many changes throughout the text1 thus bringing his work abreast of the most recent developments4 ,the chapter on banking in the ,united ,states has been entirely re-written2 as it now stands1 it includes a description of the ,federal ,reserve ,bank system and a consideration of the principles underlying the new legislation4 ,the chapter on trusts and combinations has been largely re-written1 with reference to the laws enacted in #aiad4 ,considerable addition and revision has been made in the chapter on workmen's insurance1 calling attention to the noteworthy steps taken of late years in ,england and the ,united ,states4 ,the chapters on taxation and especially on income taxes1 and on some other topics1 have been similarly brought to date4 ,a remarkable tribute to the merit of this book is that while it was not intended primarily as a class text1 it has been adopted for exclusive use as a text in many of the colleges and universities1 both large and small4 ,experience has shown conclusively that the book's clarity of expression and freedom from the usual technical treatment of the subject has made it an especially suitable text for all colleges4 ,for the smaller institutions1 the book has the additional advantage of containing all the necessary material required in the usual course in economics1 and thus avoids the extra expense and trouble of using several other books to supplement the basic text4 ,in fact1 the value and the extended use of this work as a comprehensive1 untechnical treatment of the subject1 have led many eminent economists to regard it as the most notable contribution to the subject of economics since the time of ,john ,stuart ,mill4 ,,the ,,macmillan ,,company ,publishers #fd-ff ,fifth ,avenue ,new ,york 99 99 99 99 99 ,transcriber's ,notes3 ,obvious typographical errors were corrected4 ,hyphenation inconsistency between co-partnership as used by the author1 and ,copartnership as in the title of a quoted reference1 was retained as in the original4 ,a few out-of-order index entries were relocated4 ,advertisements3 ,,the ,,macmillan ,,company ,publishers #fd-ff ,fifth ,avenue ,new ,york appeared at the bottom of each ad page in the original4 ,this has been reduced to one occurrence after the final ad4