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INTRODUCTION



TO THE






Study of Fxonomics



BY

CHARLES JESSE BULLOCK, PH.D.

ASSISTANT PROFESSOR OK ECONOMICS IN WILLIAMS COLLEGE
NFAV EDITION, REVISED AND ENLARGED




SILVER, BURDETT AND COMPANY
New York BOSTON Chicago



Ctccq. (SO 3



Copyright, 1897,
By Silver, Burdett and Company

Copyright, 1900,
By Silver, Burdett and Company



2^5.1



3?K



PREFACE.



This work is designed for an introductory text-book
of economic science. The first three chapters aim to
familiarize the student with an orderly treatment of
some leading facts in the economic history of the
United States before the study of economic theory is
commenced. Throughout the book economic principles
arc discussed with special reference to American con-
ditions, and their workings are illustrated by frequent
allusions to American experience.

Some of the chapters treat of topics that are ex-
tremely diflicult. In such cases no attempt has been
made to secure a false appearance of simplicity. The
subject of public finance has been only incidentally
touched upon. The author considers it impossible to
discuss taxation satisfactorily without studying public
expenditures also. To do this would have required
more space than could be allotted to that subject.

When many important points of economic theory are
unsettled, as is certainly the case at the present time,
the preparation of a text-book is not an easy task. The
author believes that it is neither desirable nor pos-
sible to introduce the beginner to many controversies



4 PREFACE.

on fundamental points of theory. For this reason he
has been obliged oftentimes to present his own views
much more dogmatically than he would desire to do
under other circumstances. On practical problems,
however, such as bimetallism and monopolies, where
weight of opinion is nearly evenly balanced, every effort
has been made to present both sides of the controversies.
The author has received invaluable assistance in the
preparation of this work. Special acknowledgment
should be made to Professor Charles H. Hull, of Cornell
University, to whose suggestions and criticisms this
book owes much of whatever value it may have. The
thanks of the author are due especially to his wife, who
prepared nearly all the manuscript for the printer, light-
ening by one half the labor of writing this work.

CHARLES JESSE BULLOCK.
Ithaca, N. Y., April, 1897.

PREFACE TO THE SECOND EDITION.

In this second edition the greater part of the original
work remains unchanged, except for the fact that at a
few points the materials have been brought up to date.
The chapter on value, however, has been considerably
altered, and the sections relating to normal value have
been entirely rewritten. Finally, at the risk of length-
ening the book unduly, a new chapter devoted to public

expenditures and revenues has been added.

C. J. B.
Wii.i.iamstown, Mass., April, 1900.



CONTENTS.



CHAPTER I.

PAGB

Introduction to the Economic History of the

United States 11

I. Westward Expansion 11

II. Land Tenures in the United States 14

III. Growth of Population in the United States ... 18

IV. Systems of Labor in the United States , . . . 22
Literature on Chapter I ... 30



CHAPTER II.

The Growth of Foundational Industries .... 32

I. The Fur Trade and Cattle Raising 32

II. Agriculture 35

III. Fisheries and Mining 43

Literature on Chapter II 47



CHAPTER III.

Manufactures and Transportation 48

I. Colonial Manufactures 48

II. The Industrial Revolution and the Factory System . 53

III. Transportation . . 58



6 CONTENTS.

PAGE

IV. Ship Building 65

V. The Textile Industries 69

VI. Iron and Steel Industries 74

Literature on Chapter III. 77



CHAPTER IV.

The Consumption of Wealth 79

I. Human Wants 79

II. Economic Goods 84

III. The Consumption of Wealth 87

IV. Statistics of Consumption 99

V. Economy in Consumption. Saving and Investment . 101

VI. Demand 110

Literature on Chapter IV 1M



CHAPTER V.

The Production of Wealth 115

I. Production in General 115

II. The Factors of Production 118

Literature on Chapter V 142



CHAPTER VI.

The Production of Wealth {continued) 148

I. Organization of the Factors of Production .... 143

H. Stages in the Developmenl of Production .... 157

III. Freedom in the Establishment of Productive Ihider-

takings 100

IV. Cost of Production 102

V. The Invcsl niriii of Labor and Capital upon Land . 164

VI. Large-Scale Production 170

Literature on Chapter VI 179



CONTENTS. 7
CHAPTER VII.

PAOK

The Theory of Exchange 180

I. Exchange in General 180

II. Value 183

III. Market Value 186

IV. Normal Value 194

V. Exceptions to the Theory of Normal Value .... 2U9

Literature on Chapter VII 217

CHAPTER Vm.

Money 218

I. Development of Metallic Money ....... 218

II. The Value of Metallic Money 227

III. Debased Money. Gresham's Law 242

IV. Inflation and Contraction 252

V. Government Paper Money 257

Literature on Chapter VHI 263

â– â–  '

CHAPTER IX. i%

Money and Credit 264

I. Credit and Instruments of Credit 264

II. Banks as Institutions of Credit 273

III. Advantages and Disadvantages of Credit .... 278

IV. Territorial Distribution of the Precious Metals . . 279
V. Summary of the Theory of Money 282

Literature on Chapter IX. 287

CHAPTER X.

Monetary History of the United States. Bimet-
allism 288

I. Monetary History of the United States 288

n. Bimetallism 297

Literature on Chapter X ... 308



CONTENTS.



CHAPTER XI.

PAGE

Monopolies 309

I. The Nature of Monopolies. Monopoly Value . . . 309

II. Classes of Monopolies 313

III. General Considerations concerning Modern Monop-

olies 318

IV. The Problem of Natural Monopolies 320

V. Capitalistic Monopolies 325

VI. Final Considerations concerning Monopolies . . . 329

Literature on Chapter XI .... 336



CHAPTER XII.

International Trade 337

I. The Foreign Trade of the United States .... 337

II. The Nature of International Commerce 339

III. International Values 344

IV. Restriction of International Trade 351

Literature on Chapter XII 374



CHAPTER XIII.

The Distribution of Wealth „ . . 375

I. Social Income 375

II. Private Income 378

III. Primary and Secondary Distribution 380

IV. General Classification of Private Incomes .... 385
V. Interest 387

VI. Rent 399

VII. Wages 410

VIII. Profits 424

Literature on Chapter XTII 431



CONTENTS.



CHAITKIl XIV.

PACK

The Wages System 432

I. General Considerations on the Labor Contract . . 432

II. Labor Laws and the Labor Contract 437

III. Labor Organizations and the Labor Contract . . . 440

IV. The Unfavorable! Relation of Laborers to the Product

of their Labor 44!)

V. Conciliation and Arbitration 453

Literature on Chapter XIV. . . 457



CHAPTER XV.

Land Nationalization. Socialism 458

I. Land Nationalization 458

II. Socialism 404

Literature on Chapter XV 477

CHAPTER XVI.

The Economic Functions of Government 478

I. Economic Functions performed by Governments . . 478
II. Examination of Modern Theories of Governmental

Functions 182

III. The Several Functions of Government considered

from the Point of View of Individualism . . . 4S8

Literature on Chapter XVI 102

CHAPTER XVII.

Governmental Expenditures and Revenues .... 493

I. Public Expenditures 493

II. Public Revenues 49S

III. Taxation in the United States 514

Literature on Chapter XVII 551



10 CONTENTS.

PAOB

BlBLIOGRAPnY 553

I. English and American Works 553

II. Periodical Literature 568

III. French and German Works 569

(1) French Works on Economics 569

(2) German Works on Economics 570

Index 573



330- B^-
INTR0DUCTI0N TO ECONOMICS

CHAPTER I.

INTRODUCTION TO THE ECONOMIC niSTORY OP THE
UNITED STATES.

I. Westward Expansion.

§ 1. The English colonies in North America were
planted on the mere threshold of a vast territory of con
tinental extent and imperial richness. Re-

Westward

sistlcssly the line of settlement has been movement of
pushed westward until, at the present day, pop
no distinct frontier of unsettled land exists in the
United States. This westward expansion of population
over a vast area of free land has been the fundamental
fact in the economic history of the country, exerting an
influence upon almost every phase of its economic life.

§ 2. The colonists of the seventeenth century, ad-
vancing through the valleys of the rivers flowing
into the Atlantic, pushed their settlements The first
slightly beyond the "fall line," or the point J^^SHm
where the first falls obstructed the naviga- expansion,
tion of the rivers. The frontier of the seventeenth
century corresponded roughly with the western border
of the Atlantic coast region. From 1700 to 17C0 the



12 ECONOMIC HISTORY OF THE UNITED STATES.

frontier was advanced another stage toward the west.
Emigrants gradually followed the rivers that penetrate
the Appalachian region, and formed settlements in the
table-lands of Pennsylvania, Virginia, and the Caro-
linas. In New York and New England many settlers
pushed toward the interior of those sections. Mean-
while, the eastern or tide water regions became an area
of more or less continuous settlement.

§ 3. The third stage in the advance of the frontier

occurred between 1760 and 1790. Settlers moved

_ ,_, , through the valleys and mountain passes of

The third ° J r

and fourth the Appalachians, and emerged in Tennes-
see, and Kentucky, and around the upper
branches of the Ohio River. Thus the frontier passed
over the mountains, while the area of continuous settle-
ments advanced well into the Appalachian region.
With the Appalachian mountains once passed, emi-
grants moved rapidly into the Mississippi Valley. In
1820, Ohio, southern Indiana and southern Illinois,
Tennessee, Kentucky, and southeastern Missouri were
included within the settled area. West of the Missis-
sippi and along the Great Lakes, a fourth region of
frontier existed.

§ 4. From 1820 to 1850 the westward movement of

population was very rapid. The construction of the

Erie Canal, in 1825, and the use of the

The fifth

and sixth steamboat upon the western rivers, facili-
tated communication with the East, and
stimulated the settlement of the Mississippi Valley. By
1850 the frontier was advanced to the eastern boundary






WESTWARD EXPANSION. 13

of Kansas and Nebraska, while great states had arisen
east of the Mississippi. At the same time a new fron-
tier of settlement was begun in California, Oregon, and
Utah. By 1880 the territory intervening between the
Kansas-Nebraska and the Pacific frontiers of 1850 had
become populated, although somewhat sparsely. In
many places frontier conditions still existed, but areas
of thicker settlement had so broken into the old Rocky
Mountain frontier that a distinct line of frontier no longer
existed. The decade from 1880 to 1890 saw almost the
complete disappearance of an " American frontier."

§ 5. Up to the present time the economic history of
the United States has been marked by a continual west-
ward movement of population over vacant „. ...

1 L Significance

lands. In the future it will be altogether a of westward
story of the more complete development of P
the territory won for the cause of civilization by the
labors and privations of the American pioneer. The
significance of this movement for westward expansion
has been understood by few. For this reason, says
Woodrow Wilson, " the history of the country and the
ambitions of its people have been deemed both sordid
and mean, inspired by nothing better than a desire for
the gross comforts of material abundance ; and it has
been pronounced grotesque that mere bigness and
wealth should be put forward as the most prominent
grounds for the boast of greatness. The obvious fact
is that for the creation of the nation the conquest of
her proper territory from Nature was first necessary;
and this task, which is hardly yet completed, has been



14 ECONOMIC HISTORY OF THE UNITED STATES.

idealized in the popular mind. A bold race has de-
rived inspiration from the size, the difficulty, the dan-
ger of the task. Expansion has meant nationalization ;
nationalization has meant strength and elevation of
view."

II. Land Tenures in the United States.

§ 6. Systems of land tenure influence powerfully the

economic development of a country. In Europe, the

The urfiuence possession of land has often conferred

of land economic superiority and social distinc-

tenures.

tion. In the Middle Ages the large land-
owners became the feudal rulers of Europe, while the
small owners and the landless men were obliged to
place themselves under the protection of some feudal
lord, in a position of economic and social dependence.
In modern Europe the landed aristocracy has lost most
of its exclusive political privileges, but retains something
of its former social superiority. Land tenures have in
most countries remained aristocratic, — that is, such as
to perpetuate large estates and to make difficult the
growth of a large number of small holdings. Such
land tenures keep the mass of the agricultural popula-
tion of Europe in a position of economic dependence
upon the land-owning classes.

In the United States economic development has

taken a different direction. In some colonies efforts

Tenures in were made to create large estates whose

the united proprietors should enjoy special privileges,

SDBXGfli

and various conditions sometimes made it
difficult for small proprietors to acquire titles to land.



LAND TENURES IN THE UNITED STATES, lo

But, in the long run, the tendency was toward a popu-
lar system of land tenure and land transfer. After the
Revolution, practically all traces of aristocratic laud
laws were swept from the statutes of the states. Small
holdings had always been the rule in New England,
while large estates became more common as one passed
toward the South. These differences had an economic
explanation. The more fertile lands of the middle and
southern colonies made large farms and plantations
profitable economically. On the less fertile soils of
New England, smaller farms and a more careful cul-
tivation were an economic necessity. Similar causes
explain differences in agricultural tenures that exist
in the country at the present day.

§ 7. Since vacant lands abounded, the management
and settlement of such public lands became an impor-
tant problem early in colonial history. ^1^â„¢!^^
The usual outcome was that the people of public

~ lands.

finally secured the right to acquire owner-
ship of the vacant territory by simple methods of reg-
istration, and by making a payment that was often
nominal. The growth of democracy in the colonies
made such a solution inevitable.

The War for Independence placed in the control of
the United States nearly all the territory now comprised
within its limits east of the Mississippi. 1 The public
The territory west of the Alleghanics was domain of the

J , ° United States.

ceded to the national government by the

1 On the subject of land cessions, see maps in MacCoitn, Historical
Atlas; Hinsdale, The Old Northwest; Gannett, The Building of a
Nation.



16 ECONOMIC HISTORY OF THE UNITED STATES

states, and became a public domain. In 1785 and 1787
Congress passed ordinances that provided for the ad-
ministration of the Northwest Territory. These ordi-
nances laid down the lines which the policy of the United
States has always followed, in many important features.
The lands were divided by a governmental survey into
townships six miles square. 1 Entire townships or sec-
tions of townships were sold at public sale for not less
than a dollar per acre. This system enabled settlers to
locate easily in the states north of the Ohio, and conse-
quently the flow of population into the Ohio Valley was
very rapid. By several acquisitions the United States
extended its territory to the present limits ; and the
public domain included, at one time and another,
2,889,175 square miles. 2 The thirteen original states,
together with Maine, Kentucky, and Texas, were never
part of the public domain. Their area is about 699,000
square miles.

This vast public domain has been sold at public and

at private sale at a common price of $1.25 to $2.50 per

acre. Since 1862 a free homestead of not

Disposal of

the public more than one hundred and sixty acres has
been granted practically free of charge to
every citizen who is the head of a family, or above the
age of twenty-one, on condition that he shall actually
cultivate the land for five years. Lands valuable for
minerals, for timber or stone, for town sites, etc. have

1 See Fiske, Civil Government, 81-88 ; Hinsdale, The Old North-
west, 255-279.

2 For these statistics see Donaldson, The Public Domain, 10-14 ; Sato,
The Land Question, 21-77.



LAND TENURES IN THE UNITED STATES. 17

/)ccn sold on special terms. Vast tracts of land have

been given away for the purpose of assisting in the

construction of railroads and military roads, for the

endowment of schools and colleges, and for military

bounties to soldiers and sailors. In these ways the

larger part of the original domain has passed out of

the hands of the United States. In 1894, exclusive of

Indian and military reservations, there remained about

850,000 square miles of public domain. To this should

be added nearly all of the 577,390 square miles included

in the limits of the territory of Alaska. Of the lands

that remain, only a small part will be available for

agricultural purposes until the arid regions of the West

shall be irrigated.

There have been great abuses in the administration

of the public domain. Vast tracts of land have been

secured by fraud, railroads and other cor-

J Result of the

porations have secured land without fulfill- public land

ing the conditions upon which the grants ^ cy '
were made, while land and timber thieves have sup-
ported lobbies at Washington to prevent the passage
of laws designed to protect public interests. Yet, in
spite of all abuses, millions of settlers have found
homes on lands secured from the United States, the
resources of the country have been developed, and
twenty-seven states, carved out of the public domain,
have been admitted to the Union. On the agricultural
lands, holdings of moderate size have been the rule ; and
the public-land states have become composed of a large
number of proprietors, not of landlords and tenants.

2



18 ECONOMIC HISTORY OF THE UNITED STATES.

III. Growth of Population in the United States.
§ 8. During the seventeenth century the population
of the English colonies grew quite slowly, but from

1700 to 1775 numbers increased rapidly.
Statistics of . .

increase of Mr. Bancroft estimates the population in
population. 1754 at l5l65?000 whites and 263,000 ne-
groes. In 1775 it had increased to 2,500,000 souls.
The English element predominated in most of the colo-
nies at that time, but the population was quite hetero-
geneous. In New York the Dutch stock prevailed, on
the Delaware River there were settlements of Swedes, in
Pennsylvania there were many Germans, in the moun-
tainous districts of the Appalachian frontier Scotch-Irish
were most numerous, while the southern colonies con-
tained many Huguenots. The First Census of the
United States, in 1790, showed the population to be
3,924,214. The subsequent growth of the country is
shown in the following: table : —



Date




Per cent


Number of


of


Population.


of


inhabitants


Census.




increase.


per sq. mile.


1790


3,929,214




4.89


1800


5,308,483


35.10


6.61


1810


7,239,881


36.38


3.09


1820


9,033,822


33.07


4.76


1830


l'i.si ;r,,n-_>n


33.55


6.35


1840


17,069,463


32.67


843


1850


28,191,876


36.87


7.93


1860


81,443,821


35.58


10.84


1870


38,558,871


22.03


13.80


1880


60 155,783


30.08


17.29


1890


62,622,250


24.86


21.31



THE GROWTH OF POPULATION. 19

§ 9. The enormous increase of the population of the

United States during the last century is due partly to

natural increase bv a constant excess of

J Natural

births over deaths. From 1700 to 1820 increase of
the natural increase was very great, so that pop
population doubled repeatedly in periods of about twenty-
live years. This was due to the abundance of fertile
land which was usually accessible to every one. Food,
clothing, and shelter could be secured very cheaply.
An increase of numbers meant not so much an increase
of mouths to be fed, as an addition to the productive
labor of each family employed upon new land. Under
such conditions marriages occurred early, families were
large, and the natural increase of numbers was rapid.
After 1820 it was noticed that the rate of natural
increase began to diminish. This became apparent in
the older and more thickly populated regions. In recent
times this condition has become very general, as the pop-
ulation of more states has become relatively dense. 1

§ 10. Immigration has been so large that the smaller
rate of natural increase has been less apparent than it
would have been otherwise. From 1790
to 1820 immigration was small, less than
250,000 persons coming to this country during that
period. Between 1820 and 1850 over 2,400,000 immi-
grants arrived on our shores, and as many more came

1 See Tucker, "Progress of the United States," 89-107, published in
1843, for a discussion of the decreased rate of natural increase. Also
read Ma vo-S. Mini's " Statistics and Sociology," chaps, v., vi., vii., and
yiii.



20 ECONOMIC HISTORY OF THE UNITED STATES.

between 1850 and 1860. In the latter year more than
thirteen per cent of the total population was estimated
to be of foreign birth. After the close of the Civil
War immigration assumed larger proportions than ever.
The West welcomed immigrants, bureaus were estab-
lished to aid them, the cost of ocean and land trans-
portation was cheapened, and transportation companies
made efforts to obtain passengers from foreign lands.
In 1871, 321,350 immigrants came to this country ; and
in 1882, 788,992 arrived. Since then the annual aver-
age has been about half a million. The whole number
of immigrants from 1820 to 1894 has been 17,428,000.
The Census of 1890 showed that the population of the
United States fell into the following groups : —

Native-born whites with native parents . . 34,358,348

Native-born whites with foreign parents . 11,503,675

Foreign-born whites 9,121,867

Colored persons 7,638,360

Formerly, most of the immigrants came from Ireland,
England, and Germany. More recently, larger num-
bers have come from the Scandinavian countries. Dur-
ing the last decade immigration from Ireland has fallen
off, while Austria-Hungary, Poland, and Italy have sent
vast numbers of immigrants.

§ 11. The general movement of population has always

been westward, on account of the unoccupied lands of

Mobility of the frontier. Not only immigrants, but also

o^thTun^ed man y °f the native population, have formed

states. this stream of westward migration. No

other country o£ tbe world has shown, at least in



THE CllOWTII OF POPl'/.AriON.



21



modern times, an equal amount of internal migration.
This mobility of population lias diminished the force
of all economic shocks. In 1890 it appeared that 21.55
per cent of the native-born inhabitants of the United
States were living in a different state from that in
which they were born. In 1880 it was shown that only
one half of the people of native birth were living in the
county where they were born.

§ 12. In progressive countries there has appeared, in
modern times, a marked tendency of the population ta
concentrate in cities. This has been the Growth f
result of the development of manufactures cities -
and commerce, and of the improvement of transporta-
tion facilities. The following table shows the growth of
that portion of the population of the United States
which lives in towns and cities of 8,000 inhabitants
and over. In 1790 the number of such towns was six,
in 1890 it was four hundred and forty-eight.



Census Years.


Population
of the


Population
of


Inhabitants of
Cities in each 100




United States.


Cities.


of the
Total Population.


1790


3,929,214


131,472


3.35


1800


5,308,483


210,873


3.97


1810


7,239,881


356,920


4.93


1820


9,633,822


475,135


4.93


1830 -


12,866,020


864,509


6.72