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deprived of anything that he wants. Such things do not have
to be economized ; hence they are not economic goods. In
fact, so long as they are sufficiently abundant, they give us no
concern ; but when they become scarce, we spend our time in



WEALTH AND WELL-BEING 13

trying to get more. Only those things are economic good's
which have to be economized, that is, which are scarce, or of
which we do not have as much as we should like to have.

Two meanings of wealth. Now the word wealth has two
meanings. In the first place, it is the collective name for all
economic goods, or for all goods that have to be economized,
that is, for goods that are scarce. In the second place, it
is the name of a condition or state of being. It comes from
the older word weal, which means very much the same as
well-being: These two meanings, while apparently different,
are yet very closely related. The condition of well-being which
we call wealth depends upon the possession of an adequate
supply of those things which we call wealth, that is, the things
which are ordinarily scarce and which have to be economized.
Fie who lacks an adequate supply is poor ; he who possesses
an adequate supply is rich or in a state of wealth. In short,
those economic goods called wealth are the goods upon
which weal, or well-being, depends. Well-being is increased
when these goods are increased or economized ; well-being
is decreased when these goods are decreased or wasted.

How well-being depends upon wealth. This could not be
said of anything which is not scarce. There is such an abun-
dance of air, for example, under ordinary circumstances, that
no one would be any better off than he is now if the supply
of air could be increased, nor would anyone be any worse off
if the supply of air were slightly decreased. In other words,
no one's well-being depends upon more air, even if it could
be produced. If, however, air were so scarce that there was
not enough to go around, then not only would it need to be
economized very carefully, but there would be some advantage
in producing more of it. The weal, or well-being, of mankind
would be improved in proportion as more air could be pro-
duced ; mankind would be injured in proportion as air was
wasted or destroyed. While, therefore, we can say that air
is a necessity in a certain absolute sense, yet in a practical



14 PRINCIPLES OF POLITICAL ECONOMY

economic sense we cannot say that anyone would be better off if
more air were produced or if it were even wisely economized ;
nor can we say that anyone would be worse off if a little air
were destroyed or wasted. There would still be enough to
satisfy everybody. That is why air, though an absolute neces-
sity, is not an economic good. We should gain 'nothing by
trying to increase the supply or to economize in the use of
the existing supply. Since we do not gain anything by econo-
mizing it, it is not an economic good. Where abnormal cir-
cumstances arise, in which there is not enough air, then it
has to be economized and becomes at that particular time and
place an economic good. If such circumstances could last, air
would become wealth in the same sense that food, clothing,
fuel, and certain other things are now wealth. It would then
be true of air, as of these other things, that well-being could be
increased by producing or economizing air and decreased by
destroying it, wasting it, or otherwise making it scarcer.

The question of having more or having less. Water is
another illustration, perhaps a better one because there are
many places where water is so abundant that it does not have
to be economized at all, while there are other places where it
is so scarce that it has to be economized very carefully indeed.
In the former places water is not wealth ; in the latter it is.
In the former no one labors to secure any more ; in the latter
they do. In the former no one would be better off if there
were more water ; in the latter some people would be better off.
In the former, well-being does not depend upon a little more
or a little less water ; in the latter it does. In the former class
of cases there is no occasion for economizing water ; in the
latter it is very important that it be economized and made to
go as far as possible. In the former class of cases the formula
"more water, greater well-being; less water, less well-being"
is not true ; in the latter it is true. This is the test in every
time and place as to whether water is wealth or not. All
that has been said of water may be said of anything else.



WEALTH AND WELL-BEING 15

The same test must be applied to determine whether it is wealth
or not. As a matter of fact, water, like a great many other
things, is sometimes too abundant, so abundant that men
find it to their advantage to go to considerable pains in order
to get rid of some of it or to lessen the supply. In such cases
it may be called tilth. In the diagram on page 16 is a classifi-
cation of all tangible objects with which it would be possible
for man to concern himself. Those which are harmful to him he
must try to exterminate. Toward those which are useless with-
out being in the way or being otherwise harmful he is indif-
ferent. Those which are useful to him, called goods, concern
him most. Of these, some are too abundant at certain times
and places. In such times and places his attitude toward them
must be very much the same as that toward those which are
positively harmful. Yet when they exist in smaller quantities,
that is, in quantities less than he needs, he will strive as hard
to get more as he will strive to reduce the supply when it is
too abundant. Water in swampy land is an example of over-
abundance ; in desert land, of underabundance. Manure in a
city livery stable is an equally good example of overabundance ;
in a sterile field, of underabundance. If the owner of the
stable could not sell the manure, or induce someone to take
it away, he would be willing to pay someone to remove it.
To the market gardener it is wealth ; and if he cannot other-
wise secure it, he will pay the owner of the stable for it. In
that case it is scarce from the standpoint of the whole com-
munity, and is therefore social wealth. If, however, there is
more than even the market gardeners and farmers can use,
they would be paid for hauling it away instead of having to
pay for the privilege. Such goods, when they are overabun-
dant, may, as suggested above, be called illth, to distinguish
them from those which are underabundant and called wealth.
Relation of value to economic goods. We have gone to con-
siderable pains to point out that one characteristic of economic
goods is that they are always scarce. It is this which gives



16



PRINCIPLES OF POLITICAL ECONOMY







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WEALTH AND WELL-BEING 17

them the power to induce men to work. Another characteristic
is that they all have value, or power in exchange. The power
to command other desirable things in peaceful and voluntary
exchange that is, value is very much the same as the
power to induce men to work. That is to say, the thing which
possesses one kind of power will always possess the other, if
indeed it be not incorrect to speak of them as different kinds
of power. The object which possesses this power to appeal
to human motives in such a way as to induce men either to
give up some desirable object in exchange for it or to labor
in order to produce it, is always said to be valuable. This
power depends in all cases upon the scarcity or insufficiency
of the existing supply of the object in question. This simply
amounts to the truism that a thing would not possess this
power unless someone could be found who wanted more of
it than he had. If a person or a considerable number of per-
sons can be found who want more than they have, there will
be someone who will give up something in order to get more
or who will work in order to produce more. These things,
again, are economic goods, or wealth. Since, as we have just
shown, they all possess value, it amounts to the same thing to
say that wealth consists of things that have value. In short,
such words as wealth, vahie, economic goods, and economy all
center around the one great fact of scarcity, that is, the insuf-
ficiency of certain things at certain times and places to satisfy
desires. Out of this great fact grow also such ideas as prop-
erty, industry, and foresight. No one wants to secure property
rights, for example, in anything of which everybody has enough.
But when anyone fears that there may not be enough of a cer-
tain thing to go around, and that he may, therefore, be left
out, he naturally wants to guard against that calamity by get-
ting possession of a supply. He will try to get possession of
a supply either by producing it himself or by buying it of
someone else, and he will try to guard his treasure carefully.
When the State steps in and undertakes to protect him in his



1 8 PRINCIPLES OF POLITICAL ECONOMY

possession, he has then secured a property right in the thing
in question. Again, productive industry, as already shown,
is directed toward alleviating scarcity or increasing the sup-
ply of something whose supply would otherwise be insuffi-
cient. Frugality and foresight are exercised to provide against
further scarcity.

Meaning of scarcity. Now scarcity means nothing except
insufficiency in a given time and place to satisfy the desires
which exist in that time and place. It does not mean rarity,
because, no matter how rare a thing may be, if there is as
much as is wanted, it is not scarce ; and no matter how great
the total quantity, if there is less than is wanted, it is insuffi-
cient, or scarce. And it is always well to bear in mind that a
thing is scarce, if at all, because the available quantity in a
given time and place is insufficient. No matter how much
water there may be in the Mississippi River, it does not alter
the fact that water is scarce a few hundred miles to the west-
ward ; no matter how much copper there may be in the
bowels of the earth, it does not alter the fact that there is
less copper in available form than is needed on the surface.
It is this fact which induces men to labor to move things from
one place to another.

Before proceeding farther it is necessary to make one im-
portant qualification. Men do not always know upon what
their weal, or well-being, depends. If they are mistaken on any
phase of this question, they will be placing a high value upon
some things that are not good for them, and a low value or
no value at all upon some things that are good for them.
They are poor economizers who do this, but there are many
poor economizers in the world. This is the same as saying
that they will sometimes desire more of a thing than they
have, when they really have too much already, or less than
they have, when they really have too little already. With this
qualification in view, all we can say is that men will regard
as wealth everything upon which they think their well-being



WEALTH AND WELL-BEING 19

depends in the practical economic sense described above. That
is, if they think they need more than they have, they will
strive to get more, either by offering something for it, thus
giving it a market value, or by trying to produce it, thus creat-
ing an industry. This explains why it is that the student of
economics is sometimes compelled to include among economic
goods, or wealth, articles which he himself would not use
or which he regards as deleterious, such as opium, alcoholic
drinks, or tobacco.

Importance of desiring the right things. Teaching or per-
suading people to want the right things has commonly been
regarded as the work of the educator and the preacher rather
than the economist. The latter has not generally undertaken
to pass judgment on the wants of the people. He has assumed,
rather, that his work was done when he had shown how such
wants as the people happen to have are satisfied and may be
satisfied more and more fully. But no one who really has at
heart the welfare of the people can be indifferent to the quality
of their wants or desires. What men want most they will try
hardest to get ; the character of their wants or desires, rather
than their real needs, will therefore determine the character
of their industries and their government. But, more important
than that, if their desires are opposed to their needs (that is, if
they desire things that are harmful to them), then the more effi-
cient their system of production becomes the more harm they
will do themselves. In that case an efficient industrial system
promotes national deterioration rather than national well-being.
If one were to make a study of the wreckage of nations, one
would probably find that more had decayed because their wants
were wrong than because they were not able to supply their
wants. That is one reason why, as stated earlier in this chapter,
the subject of consumption is of such tremendous importance.

Necessity of economizing means of production. Thus far in
discussing the necessity for economy we have been considering
the direct satisfaction of wants and the means thereto. But the



20 PRINCIPLES OF POLITICAL ECONOMY

necessity for economy extends much farther than this. In
the effort to overcome scarcity, that is, in the production of
goods, it is necessary to make use of various factors of produc-
tion, such as labor, tools, raw materials, etc. These also are
scarce and have to be economized. To be sure, many things
that are essential to production are not scarce. These are not
considered as factors of production ; that is, they are not eco-
nomic factors of production at all. Carbon dioxide is just as
essential to the growing of plants as nitrogen, phosphorus,
or potash ; but there is plenty of carbon dioxide in the air,
whereas in most soils nitrogen, phosphorus, and potash are
scarce or tending to become scarce. Therefore these three
substances are considered as factors (that is, economic factors)
in plant growth. Applying the same formula here as we did
to other things earlier in this discussion, we can say, and say
truly, " More nitrogen, more plant growth ; less nitrogen, less
plant growth." Therefore agricultural production is increased
by increasing the nitrogen in the soil. The same may be said
of phosphorus and potash, but the formula does not seem to
apply to carbon dioxide. This is a principle of the very great-
est importance, as will be seen later. Some of the greatest
problems in economics and social justice depend upon this
principle and are incapable of solution without it.

Why a thing has value. The fact that desirability and
scarcity, and these alone, give value to a thing is perhaps
clearly enough established by this time. Few will care to ques-
tion the statement that not only must a thing be desired, but
more must be desired than there is to be had, before men
will strive to get more either by purchase or by production.
Moreover, this is as true of a factor used in production, such
as tools, as of an article of direct consumption, such as bread.
It may not be quite so obvious, but it is none the less true, that
this is also one of the great sources of that conflict of human
interests which gives rise to most of our problems of justice
and equity. This will be discussed in the next chapter.



WEALTH AND WELL-BEING 21

TEN CHARACTERISTICS OF ECONOMIC GOODS, OR WEALTH

1 . They are scarce ; that is, there is less of them than is wanted.

2. They have to be economized.

3. Well-being is thought to increase as they increase and to decrease as
they decrease.

4. Men labor to produce them, that is, to make them less scarce.

5. Men try to secure them by purchase.

6. They have value, or power in exchange.

7. They become the subject of property rights.

8. Wise men exercise frugality and foresight with respect to them.

9. There is a conflict of interests among men with regard to them,
because there is not enough of them to go around and satisfy everybody.

10. They give rise to questions of justice and equity.



CHAPTER III
SELF-INTEREST

The fact that we are going to study the problem of national
prosperity and progress certainly implies that we have an inter-
est in it. It probably implies also that we care somewhat more
for the prosperity or progress of our own nation than for that
of other nations. That would mean that we are somewhat
self-centered. Even the humanitarian who professes to care
for mankind above all nations seems still to prefer mankind
to other species. There are people who have so deep an
interest in animals as to make them unwilling to sacrifice any
animal for the benefit of mankind. They are slightly less self-
centered than the humanitarians, but even they cannot take
quite the same interest in the lower as in the higher animals.
In short, no one can avoid being slightly self-centered, caring
more for some animals than for others, for certain races or
nationalties of men than for others, or even for certain per-
sons than for others. Generally it will be found that those
species, nationalities, or persons for whom we care most are
in some sense nearer to ourselves than those for whom we
care least.

This fact of self-centered interest must be taken as one of
the original, or primary, facts in our problem of nation build-
ing. It is therefore very important that we examine it and
see exactly what it means.

What is self-interest? Our discussion will center naturally
around two main questions : first, what does it mean to be self-
interested ; and, second, is it a good or a bad thing for each
individual to be self-interested, or at least slightly self-centered,
as we shall call it. In discussing the first of these questions



SELF-INTEREST 23

it is not necessary to go very far into that form of hair-splitting
analysis which considers whether benevolence is not merely
another form of selfishness. 1 It is sometimes argued by a
certain kind of sophist that the benevolent person is benevo-
lent because he gets pleasure from being benevolent. Since
it gives him pleasure, it is only a form of self-gratification ; and
since it is only a form of self-gratification, it is only another
form of selfishness. It may be true, from a certain point of
view, that a man may get more pleasure from the taste of food
upon the palates of his children than upon his own. A soph-
ist might say that he was as truly selfish as a man who got
no pleasure whatever from the taste of food upon any palate
but his own. However, no sensible person would remain long
in doubt as to which would make the better father. There is
no doubt that the man who takes some delight in the welfare of
his neighbors and fellow citizens is a better neighbor and citizen
than a man who takes no pleasure whatever in such things.

In trying to understand what self-interest really is, there
are two extreme views to be avoided. One is that self-interest
means such extreme selfishness as to show no regard whatever
for the interests of others ; the other is that benevolence means
a real preference for other people as compared with self. Now
self-interest simply means some preference for self as com-
pared with certain other people ; and benevolence, instead of
meaning a preference for other people, is quite compatible
with some degree of preference for self. There is probably no
human being who has not some interest in other people besides
himself ; neither is there anyone who does not care more for
himself than he does for other individuals outside a rather
narrow family or neighborhood circle.

The difference between a selfish and a benevolent person.
As a matter of fact, the difference between a selfish and a
benevolent person is one of degree. An extremely selfish

1 See the author's " Essays in Social Justice," p. 60. Harvard University
Press, 1915.



24 PRINCIPLES OF POLITICAL ECONOMY

person is one who has an extreme preference for self as com-
pared with others, and whose interest in other people does not
extend beyond a rather narrow circle of relatives, friends, and
neighbors. An extremely benevolent person is one who has
only a mild preference for self as compared with others, whose
interest in others extends to a rather wide circle of relatives,
friends, neighbors, fellow citizens, and many other human
beings, and who even includes some of the kindly animals in
the circle of his care and protection. To prefer the satis-
faction which the expenditure of a dollar on charity gives me
to the satisfaction which it would give me in the gratification
of my own palate does not mean that I have a deeper inter-
rest in the receiver of my charity than I have in myself. If
I spent the dollar upon myself, it might supply only a trifling
need or gratify a mere whim or caprice, because I have spent
so many other dollars on myself as to have supplied all my
principal needs. But when it is spent in charity, it may
supply a vital need of someone else. If I were in exactly as
great need as he of the objects which my last dollar would pur-
chase, and I then gave him my dollar, that would show that
I appreciated his interest as highly as my own, or even more
highly than my own. If there are a number of people in
whom I am so deeply interested as to be willing to sacrifice
myself even to a slight extent, I should pass for a fairly
generous man. But while I am writing this I am fully con-
scious of the fact that there are people in various parts of
the world who are suffering from hunger, cold, and sickness.
Yet I sit comfortably in my room instead of going out to
find them and share my last dollar with them. They are so
far away in space, or they are so far removed from myself in
race, language, religion, or color that I cannot cudgel myself
into caring as much for their comfort as I do for my own. If
they were near neighbors, near relatives, I would take a deep
interest in them. Will the reader ask himself if he is not in
about the same condition ?



SELF-INTEREST 25

The way in which I appreciate an income for myself more
than I appreciate an income for someone else may be illus-
trated by means of the diagrams below :



Y




Y



E E' E' 1 E E' w E

Diagram A Diagram B Diagram C

A's appreciation of his A's appreciation of B's A's appreciation of C's



own income



In Diagram A, let us measure the income of a certain man,
whom we shall call A, along the line OX, and his appreciation
of, or interest in, each dollar of his income, along the line OY.
Thus, if his income is equal to the line OE, his interest in each
dollar is measured, let us say, by the line DE. But as his income
increases, each dollar becomes a matter of less consequence
to him. He could spare it with less real sacrifice, because,
having so many other dollars, he can still supply himself with
all the necessaries of life and some unnecessary things besides.
In other words, if we assume that his income increases from
a quantity measured by the line OE to a quantity measured by



Online LibraryThomas Nixon CarverPrinciples of political economy → online text (page 2 of 48)