Frank Albert Fetter.

Source book in economics, selected and ed. for the use of college classes online

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3 6#'J







Author of "The Principles of Economics"




Copyright, 1912, by
The Century Co.




I Markets and Prices.

1. Origin of exchange — Herbert Spencer 3

2. Origin of markets and market prices — Henry C.

Maine 8

3. Odd prices and bargains in retail trade — Eobert C.

Brooks 15

4. Some seasonal price-variations — Henry C. Taylor . 25

5. Marketing of farm products — Frank Andrews . . 34

6. Farm products and consumers' prices — Secretary

Wilson 48

7. An unsalable food surplus — The New York Times . 58

II Wealth and Its Uses.

8. Rentals of urban real estate — Eichard M. Hurd . . 61

9. Housing and rents in American towns — British Board

of Trade 68

10. The farmer's woodlot — George F. Warren .... 75

11. Hauling from farms to shipping points — U. S. Depart-

ment of Agriculture 81

12. Land from the waters^^Nathaniel S. Shaler ... 91,

13. Conservation of National resources — National Conser-

vation Commission 102

14. Depreciation in cotton factories — Tariff Board . .117

III Capital and Investment.

15. Capitalization and urban land-values — Eichard M.

Hurd 120

16. Some examples of increasing land-values — C. B. Fille-

brown 130

17. The New York exchanges — Governor Hughes' Commis-

sion . 138

IV Labor and Population.

18. Differences in efficiency of weavers — TariflF Board . 157

19. Conservation of human life — Irving Fisher . . . 163



20. Wages of farm labor — George K. Holmes . . . .176

21. Eeal wages in American towns — British Board of

Trade 184

22. Immigration and conditions of labor — J. W. Jenks and

Wk J. Lauck 187

23. Wages and cost of living — British Board of Trade . 199

24. Cotton mill efficiency and machinery — Tariff Board . 206

25. The minimum rate policy — D. A. McCabe . . . .214

V Costs, Profits and Monopoly.

26. Prices and farm management — Henry C. Taylor . . 228

27. Some findings on cotton manufactures — Tariff Board 233

28. Cost of production in the steel industry — Commis-

sioner of Corporations 247

29. The Standard Oil trust — Commissioner of Corpora-

tions 255

30. Water-power development in the United States — Com-

missioner of Corporations 265

VI Private Incomes and Social Welfare.

31. The standard of life — Mrs. Bernard Bosanquet . . 275

32. The influence of income on standards of life^ — Robert

C. Chapin 284

33. Economic causes as affecting political history — W.

M. Daniels 292

VII The State and Industry.

34. Gold production, 1890-1910— Director of the Mint . 303

35. The National banks — Comptroller of the Currency . 314

36. Plan for monetary legislation — National Monetary

Commission 324

37. The trade balance of the United States — George Paish 337

38. Some findings on wool — Tariff Board 347

39. Findings on the wool tariff— President Taft . . . 358

40. The Interstate Commerce Act — Act of Congress . .361

41. Railroad values and rates — Interstate Commerce

Commission 368

42. Railroads as national assets — Interstate Commerce

Commission 379

43. Sherman Anti-trust law — Act of Congress .... 383




[In his Principles of Sociology, Herbert Spencer suggests that
barter, and exchange for money, may have grown out of the exchange
of presents; and lie gives some evidence in support of this view.
In discussing ceremonial institutions he shows that the custom of
giving presents developed into the various forms of tribute, taxation,
sacrifice, and ecclesiastical ofTerings. He then says (Vol. II, pp. 99-
100; reproduced by permission of the publishers, D. Appleton and Co.,
New York; three volumes, 1895 and 1896) :]

Something must be added concerning presents passing be-
tween those who do not stand in acknowledged relations of
superior and inferior.

Consideration of these carries us back to the primitive form
of present-making, as it occurs between members of alien so-
cieties; and on looking at some of the facts, there is sug-
gested a question of much interest: AVhether from the pro-
pitiatory gift made under these circumstances there does
not originate another important kind of social action?
Barter is not, as we are apt to suppose, universally under-
stood.^ Cook, speaking of his failure to make any exchange
of articles with the Australians, says, ''They had, indeed, no
idea of traffic." And other statements suggest that when
exchange begins, the thought of equivalence between the things
given and received scarcely arises. Of the Ostyaks, who sup-
plied them ''with plenty of lish and wildfowl," Bell remarks,

1 [Compare with A. Smith's idea of a "propensity in human nature
to truck, barter, and exchange one thing for another." Wealth of Na-
tions, book i, ch. 2. — Ed.]



"Give them only a little tobacco and a dram of brandy, and
they ask no more, not knowing the use of money." Eemem-
bering that at first no means of measuring values exists, and
that the conception of equality of value has to grow by use,
it seems not impossible that mutual propitiation by gifts was
the act from which barter arose: the expectation that the
present received would be of like worth with that given be-
ing gradually established, and the exchanged articles simul-
taneously losing the character of presents. One may, indeed,
see the connection between the two in the familiar eases of
gifts made by European travelers to native chiefs; as where
Mungo Park writes: "Presented Mansa Kussan [the chief
man of Julifunda] with some amber, coral, and scarlet, with
which he appeared to be perfectly satisfied, and sent a bul-
lock in return," Such transactions show us both the original
meaning of the initial present as propitiatory, and the idea
that the responsive present should have an approximately-like
value : implying informal barter. Nay more. Certain usages
of the North American Indians suggest that even a circulating
medium may originate from propitiatory presents. Catlin
writes :

Wampum has been invariably manufactured, and highly valued as
a circulating medium (instead of coins, of which the Indians have no
knowledge) ; so many strings, or so many hands' breadth, being the
fixed value of a horse, a gun, a robe, etc. In treaties the wampum
belt has been passed as the pledge of friendship, and from time
immemorial sent to hostile tribes, as the messenger of peace; or paid
by so many fathoms' length, as tribute to conquering enemies.

[In the part on "Industrial Institutions," originally published ten
years later than the foregoing, Spencer says. Vol. Ill, pp. 387-391 J :

Among incidents of human intercourse few seem simpler
than barter ; and the underlying conception is one which even
the stupidest among savages are supposed to understand. It
is not so, however. In . . . treating of Cerenionial Insti-
tutions, reasons were given for suspecting that barter arose
from the giving o£ presents and the receipt of presents in re-


turn. Beyond the evidence there assigned there is sufficient
further evidence to justify this conclusion. In the narrative
of an early voyager, whose name I do not remember, occurs
the statement that barter was not understood by the Austra-
lian savages: a statement which I recollect thinking scarcely
credible. Verifying testimonies have, however, since come to
hand. Concerning the New Guinea people we read :

One of the most curious features noticed by Dr. Mikluclio Maelay
was the apparent absence of trade or barter among the people of
Astrolabe Bay. They exchange presents, however, when different tribes
visit each other, somewhat as among the New Zealanders, each party
giving tlie other what they have to spare; but no one article seems
ever to be exchanged for another of supposed equivalent value.

Confirmation is yielded by the account D'Albertis gives of
certain natives from the interior of New Guinea. Concerning
one who came on board he says :

I asked him for the belt he wore round his waist, in exchange for
some glass beads, but he did not seem to understand the proposal, which
I had to make in pantomime instead of vocal language. He spoke
a few words with his people, and then he took off his belt, and re-
ceived in exchange the beads and the looking-glass, in which he seemed
afraid to look at himself. When, however, he was on the point of
returning to shore, he wanted to have his belt back, and it was im-
possible to make him understand that he had sold it, and that if he
did not wish to part with it he must return the articles he had re-
ceived in exchange.

Another instance, somewhat different in its aspect, comes to
us from Samoa. Turner says that at a burial "every one
brought a present, and the day after the funeral these pres-
ents were all so distributed again as that every one went away
with something in return for what he brought." Of a re-
.mote people, the tribes of Nootka Sound, we read as follows
in Bancroft :

They manifest much shrewdness in their exchanges; even their sys-
tem of presents is a species of trade, the full value of each gift being
confidently expected in a return present on the next festive occasion.


A different phase of the process occurs in Africa. Describ-
ing the Bihenos, Capello and Ivens tell us :

Following tlie vicious system in operation throiigliout Africa of not
selling anything to the European, but making him a present of it,
they extort from him in turn all his goods and effects, bit by bit,
until the unhappy man finds himself under the necessity of refusing
all presents.

Thus the very idea of exchange, without which there can-
not begin commercial intercourse and industrial organiza-
tion, has itself to grow out of certain ceremonial actions orig-
inated by the desire to propitiate.

In the absence of measures of quantity and value, the
idea of equivalence must remain vague. Only where the
things offered in barter are extremely unlike in their amounts
or qualities or characters, does lack of equivalence become
manifest. How rude trading transactions are at first, is well
shown by the following extract concerning an Indian people,
the Chalikatas. Dalton says:

It was very interesting to watch the barter that took place there
between these suspicious, excitable savages and the cool, wily traders
of the plains. The former took salt chiefly in exchange for the com-
modities they brought down, and they would not submit to its being
measured or weighed to them by any known process. Seated in front
of the trader's stall, they cautiously take from a well-guarded basket
one of the articles they wish to exchange. Of this they still retain
a hold with their toe or their knee as they plunge two dirty paws
into the bright white salt. Tliey make an attempt to transfer all they
can grasp to their own basket, but the trader, with a sweep of his
hand, knocks off half the quantity, and then there is a fiery alter-
cation, which is generally terminated by a concession on the part of
the trader of a few additional pinches.

In the absence of a medium of exchange other incon-
veniences arise. One is the difficulty of bringing into rela-
tion those whose needs are reciprocal. The experiences of
Dr. Barth in Africa clearly exemplify this evil:

A small farmer who brings his corn to the Monday market ... in
Kdkawa, will on no account take his payment in shells, and will


rarely accept of a dollar: the person, therefore, who wishes to buy-
corn, if he lias only dollars, must first exchange a dollar for shells,
or rather buy shells; then with the shells he must buy a 'kulgu," or
shirt; and alter a good deal of bartering he may thus succeed in
buying the corn. . . . The fatigue to be undergone in the market is
such that I have very often seen my servants return in a state of the
utmost exhaustion.

In this place, better than elsewhere, may be named an
obstacle to a developed system of exchange which results
from the misapprehensions of the uninitiated. Of the Chi-
tralis, Captain Younghusband tells us that they supposed
rupees to be ornaments only, and could not understand re-
ceiving them in payment for work. Pim and Seemann say
of the Bayano Indians that:

They do not seem to understand exactly the value of money, and
think that the true drift of making a bargain consists in offering a
sum different to that demanded. I happened to be in a shop when
four of them came in to buy a comb, for which half a crown Itwo
and a half shillings] was asked, but the Indians said that unless the
shopkeeper would take three shillings they could not think of having it.

Here "the higgling of the market" is exhibited under its
general form — the expression of a difference between the esti-
mates of buyer and seller; and, showing that lack of dis-
crimination characterizing low intelligences, there is a
confusion between the two ways of asserting the difference.


[Sib Henky Maine in one of his lectures, cited below, shows that the
modern ideas of competition-rent for land and of the sale of land by
individuals were not known in primitive communities. Kents were de-
termined by custom. Eack-rent, an Irish term sometimes used to
indicate an extreme competition-rent, was really the rent exacted
from a person of a strange tribe in contrast with *'a fair rent, from
one of the tribe." '"In a primitive society the person who submits to
extreme teims from one group is pretty sure to be an outcast thrown
on the world by the breaking up and dispersion of some other group,
and the eflfect of giving him land on these terms is not to bring him
under the description of a tenant as understood by the economists, but
to reduce him to a condition resembling predial servitude."

The author then broadens his inquiry to that of the origin of com-
petition-price, or market-price in general; competition-rent of land
being, as he shows, but one case of market-price. We quote below
most of pages 189-201, in the chapter on "The early history of price
and rent" from Village-Communities in the East and West, six lec-
tures delivered at Oxford. First published 1871; quotations from the
third edition, 1876, by courtesy of the publisher, John Murray, Alber-
marle Street, London.]

It would almost certainly be labor wasted to search among
the records of ancient law for any trace of the ideas which
we associate with competition-rents. But if land in primitive
times was very rarely sold or (in our sense) rented, and if
movable property was very rarely hired for money, it is at
least probable that from a very early date movables were
purchased. It does not appear to me quite a hopeless under-
taking to trace the gradual development of the notions con-
nected with price; and here, if at all, we shall be able to
follow the early history of bargaining or competition. Nor,
if we can discover any primitive ideas on the point, need we
hesitate to transfer them from the sale of movables to the


competition of land. The Roman lawyers remark of the two
contracts called Sale for Price, and Hiring for Considera-
tion, that they are substantially the same, and that the rules
which govern one may be applied to the other. The observa-
tion seems to me not only true, but one which it is important
to keep in mind. You cannot indeed without forcing language
speak of the contract of sale in terms of the contract of let-
ting and hiring; but the converse is easy, and there is no
incorrectness in speaking of the letting and hiring of land
as a sale for a period of time, with the price spread over
that period. I must confess I could wish that in some famous
books this simple truth had been kept in view. It has several
times occurred to me, in reading treatises on political economy,
that if the writer had always recollected that a competition-
rent is after all nothing but price payable by instalments,
much unnecessarily mysterious language might have been
spared and some (to say the least) doubtful theories as to
the origin of rent might have been avoided. The value of
this impression anybody can verify for himself.

What, in a primitive society, is the measure of price? It
can only be called custom. Although in the East influences
destructive of the primitive notion are actively at work, yet
in the more retired villages the artificer who plies an an-
cient trade still sells his wares for the customary prices,
and would always change their quality rather than their
price — a preference, I must remark, which has now and then
exposed the natives of India to imputations of fraud not
wholly deserved. And in the "West, even in. our own coun-
try, there are traces of the same strong feeling that price
should be determined by custom in the long series of royal,
parliamentary, and municipal attempts to fix prices by tariff.
Such attempts are justly condemned as false political economy,
but it is sometimes forgotten that false political economy may
be very instructive history. , . .

What, then, is the origin of the rule that a man may
ask — or, if you choose so to put it, that he does ask — the


highest available price for the wares which he has to sell?
I think that it is in the beginning a rule of the market, and
that it has come to prevail in proportion to the spread of ideas
originating in the market. This indeed would be a proposi-
tion of little value, if I did not go farther. You are well
aware that the fundamental proposition of political economy-
is often put as the rule of buying in the cheapest market and
selling in the dearest. But since the primitive period, the
character of markets has changed almost as much as that
of society itself. In order to understand what a market orig-
inally was, you must try to picture to yourselves a territory
occupied by village-communities, self-acting and as yet
autonomous, each cultivating its arable land in the middle of
its waste, and each, I fear I must add, at perpetual
war with its neighbor. But at several points, points prob-
ably where the domains of two or three villages converged,
there appear to have been spaces of what we should now
call neutral ground. These were the markets. They were
probably the only places at which the members of the dif-
ferent primitive groups met for any purpose except war-
fare, and the persons who came to them were doubtless
at first persons specially empowered to exchange the produce
and manufactures of one little village-community for those
of another. Sir John Lubbock in his recent volume on the
"Origin of Civilization," has some interesting remarks on
the traces which remain of the very ancient association be-
tween markets and neutrality (page 205) ; nor — though I
have not now an opportunity of following up the train of
thought — can I help observing that there is a historical con-
nection of the utmost importance to the moderns between the
two, since the Jus Gentium of the Roman Prgetor, which was
in part originally a market law, is the undoubted parent of
our International Law, But, besides the notion of neutrality,
another idea was anciently associated with markets. This
was the idea of sharp practice and hard bargaining. The three
ideas seem all blended in the attributes of the god Hermes


or IMercury — at once the god of boundaries, the prince of
messengers or ambassadors, and the patron of trade, of cheat-
ing, and of thieves.

The market was then the space of neutral ground in which,
under the ancient constitution of society, the members of the
different autonomous proprietary groups met in safety and
bought and sokl unshackled by customary rule. Here, it
seems to me, the notion of a man's right to get the best price ^
for his wares took its rise, and hence it spread over the world.
Market law, I should here observe, has had a great fortune
in legal history. The Jus Gentium of the Eomans, though
doubtless intended in part to adjust the relations of Koman
citizens to a subject population, grew also in part out of com-
mercial exigencies, and the Roman Jus Gentium was grad-
ually sublimated into a moral theory which, among theories
not laying claim to a religious sanction, had no rival in the
world till the ethical doctrines of Bentham made their ap-
pearance. If, however, I could venture to detain you with
a discussion on technical law, I could easily prove that market
law has long exercised and still exercises a dissolving and
transforming influence over the very class of rules which are
profoundly modifying the more rigid and archaic branches
of jurisprudence. The law of personal or movable property
tends to absorb the law of land or of immovable property,
but the law of movable tends steadily to assimilate itself to
the law of the market. The wish to establish as law that
which is commercially expedient is plainly visible in the re-
cent decisions of English courts of justice; a whole group
of legal maxims having their origin in the law of the market
(of which the rule of caveat emptor is the most significant)
are growing at the expense of all others which compete with
them. . . .

It seems to me that the half-conscious repulsions which men
feel to doctrines which they do not deny might often be ex-
amined with more profit than is usually supposed. They will
f-ometimes be found to be the reflection of an older law of


ideas. Much of the moral opinion is no doubt in advance
of law, for it is the fruit of religious or philosophical theories
having a different origin from the law and not yet incor-
porated with it. But a good deal of it seems to me to pre-
serve rules of conduct which, though expelled from law, linger
in sentiment or practice. The repeal of the usury laws has
made it lawful to take any rate of interest for money, yet the
taking of usurious interest is not thought to be respectable,
and our courts of equity have evidently great difficulty in
bringing themselves to a complete recognition of the new
principle. Bearing this example in mind, you may not think
it an idle question if I ask: What is the real origin of the
feeling that it is not creditable to drive a hard bargain with
a near relative or a friend? It can hardly be said that there
is any rule of morality to forbid it. The feeling seems to me
to bear the traces of the old notion that men united in natural
groups do not deal with one another on principles of trade.
The only natural group in which men are now joined is the
family; and the only bond of union resembling that of the
family is that which men create for themselves by friend-
ship. ...

All indications seem to me, therefore, to point to the same
conclusion. Men united in those groups out of which modern
society has grown do not trade together on what I may call,
for shortness, commercial principles. The general proposi-
tion which is the basis of political economy made its first ap-
proach to truth under the only circumstances which admitted
of men meeting at arm's length, not as members of the same
group, but as strangers. Gradually the assumption of the
right to get the best price has penetrated into the interior
of these groups, but it is never completely received so long
as the bond of connection between man and man is assumed
to be that of family or clan-connection. The rule only tri-
umphs when the primitive community is in ruins. What are
the causes which have generalized a rule of the market until it
has been supposed to express an original and fundamental ten-


dency of Imraau nature, it is impossible to state fully, so
multifarious have they been. Everything which has helped
to convert society into a collection of individuals from being
an assemblage of families, has helped to add to the truth of the
assertion made of human nature by the political economists.
One cause may be assigned, after observation of the East,
in the substitution of caravan or carrying trade for the fre-
quentation of markets. When the first system grows up, the
merchant, often to some extent invested with the privileges
of an ambassador, carries his goods from the place of pro-

Online LibraryFrank Albert FetterSource book in economics, selected and ed. for the use of college classes → online text (page 1 of 30)