ness are much alike. In the third form of economy, however, there is some difference; a private business may prosper by producing frills and luxuries, sometimes even by pandering to vice. This could not be true of a self-sufficing nation any more than of a self-sufficing household of the primitive type. It is quite as important that the national energy be devoted to the production of important rather than of unimportant things as that the nation should be industrious or efficient in its methods of production. In other words, it is no greater waste of the nation's resources to have them remain idle than to have them misdirected or employed, however efficiently, in the production of useless things. Again, it is no more wasteful of the nation's resources to have its labor used very inefficiently by slipshod methods and poor tools than to have it engaged by the most efficient methods and the best possible tools in the production of useless or harmful commodities.

In the primitive, self-sufficing household there was very little buying and selling within the household. In the modern selfsufficing nation there is a vast amount of buying and selling among its own citizens. The subject of exchange, therefore, forms a most important part of the economy of the nation but a negligible part of the economy of a self-sufficing household. Again, the problem of the sharing of the income among the members of the household may have been a matter of some importance, but it could not have been nearly so important as it has become in the modern nation with its great diversities of interests and its wide separation of industrial classes and groups.

Another important change has taken place in the household itself: whereas in the primitive, self-sufficing household the problems of getting and utilizing were very closely related, in the modern household they are very widely separated. In recent times, especially in our cities, what is called business has come to be regarded as the source of income, whereas the home is the place where the income is utilized. Business life and home life are so distinct as frequently to be regarded as different and almost unrelated fields of action. This separation of business

from the home has given rise to a division of the field of private economics into two distinct parts, one of which is known as business economics, the other as home economics. That these two parts, which the Greeks regarded as the same subject, are now so widely separated shows that we have gone a long way from the primitive condition in which business and home life were united, and are approaching, if we have not already arrived, at a condition in which they are completely divorced. Whether this is, on the whole, a good tendency or only partly good and partly bad, is a very interesting and difficult problem. Public income and expenditure. But the problem of income and expenditure is a serious question for the public as a whole as well as for the private citizen. The state gets its income from different sources and by different methods from those pursued by the individual, but income is as necessary to a state as to a citizen. In order that its limited income may go as far as possible and accomplish the greatest possible good the question of public expenditure must be studied with the greatest care. It is scarcity in this case, as well as in the case of the individual, which makes economy necessary. If we could imagine a state with an unlimited income,-which we cannot,so that when it spent money for one purpose it was not obliged to refrain from spending money for any other purpose, there would, of course, be no occasion for public economy. Xenophon, who wrote our oldest treatise under the title of "Economics," wrote also a treatise on "The Revenues of Athens." In the former work he was well within the field of private economics, but in the latter he had got well over into the field of public economics. This branch of public economics, or political economy (that is, the branch which deals with the revenues and expenditures of the state, or with what has been called the housekeeping of the state), is commonly called public finance. It will readily be seen that there is a close resemblance between public finance, which deals with the income and expenditure of the government, and private economics, which deals with the income and expenditure of the private family.

Social well-being. But there is another branch of public economics which is broader than public finance; that is the branch which deals with the general problem of social wealth or well-being. This branch deals neither with the income and expenditure of the individual family as such nor with those of the government as such. It deals rather with the income and expenditure of the people as a whole. This is called social economy or social economics. It is the most important study for the real statesman or nation builder. Since in a democracy everyone is a nation builder (in a small way at least), in that he helps to determine the policy of the nation, it is of the greatest possible importance that everyone should study the problems of social economy as well as those of public finance and private economics.

The management of the king's household. A good illustration of the importance of this subject is found in the studies of a group of scholars who some hundreds of years ago were studying the problem of providing for the king's household. These were the finance ministers of certain kings of European countries. They are now sometimes called the cameralists. Having charge of the affairs of the king's household, they were, in a sense, studying private economics; but since the king was a public functionary, deriving much of his revenue from taxation and other public sources and performing many of the acts of government, these finance ministers were, in another sense, studying public economics. At any rate, they were severely put to it to find revenue enough to pay the expenses of the royal household or to keep the expenses within the royal revenues; that is, to balance income and expenditure. These were problems in economy. How to get as large an income as possible with the limited energy at their disposal, and how to expend that income so as to add the maximum to the resources of the king's household, were very serious problems.

The social income. The more they studied this problem the more clearly they saw that in order to increase the royal income the people over whom the king ruled must be made prosperous;

that is, the social income also must be increased. "Poor people, poor king" came to be an axiom in public finance. Therefore attention was given to the problem of increasing the social income or of promoting the prosperity of all the people. Later writers have given their chief attention to this part of the problem. In the outline at the beginning of this chapter this is called social economy.

Exchange. In one sense, as already pointed out, the social income is the annual production of the nation. So there was a tendency at first to give chief attention to the subject of production; but it was soon discovered that in social economy exchange was an important factor. In studying the internal economy of an individual household, whether a private or a royal household, exchange among the members could be left out of account; but in studying the internal economy of a whole nation it could not be left out of account, for the obvious reason that the citizens of the nation did a great deal of exchanging among themselves. This is particularly true of the modern nations. Buying and selling have come to be so large a part of the economic life of the people that for a long time it seemed to many students to be the most important aspect of economic life. So there came a time when the chief emphasis was laid upon exchange rather than upon production. Indeed, it was assumed for a time that production would almost take care of itself; that is, each individual would look after his own part in it if only the government would provide him safe and open markets and a convenient medium of exchange in the form of money and sound banking facilities.

Distribution of social income. Still later another problem was discovered to be of equal or greater importance. Like the problem of exchange this was one which also could be ignored in the study of private economics. It is the problem of the division of the products of industry among the workers. When a large number of people take part in the production of a given commodity, say shoes, the question as to how much of the value of the shoes shall go to each person or group of persons is of the

utmost importance in social economy. The farmer, the miller, and the baker, as well as the carrier, have all had something to do with the production of a loaf of bread. It is very important to know how much of the value of the bread goes to each of those who have had a part in its production. This is called the problem of distribution; as you will see, it is somewhat different from the problem of exchange, though very closely related to it. Such questions as the wages of different classes of laborers, the rent of land, the interest on capital, the profits of enterprise, are parts of the general problem of distribution. During the last fifty years, it is fair to say, mare emphasis has been laid upon the subject of distribution than upon either production or exchange.

The utilization of the social income. While the consumption of the people has been recognized as the utilization of the social income, and therefore as a thing important in itself, yet students have almost ignored it as a branch of the science of economics. One reason has doubtless been the feeling that every individual would better be left to consume his income as he liked, whether he did it wisely or foolishly, beneficially or harmfully. Attempts to control or direct his consumption have been called sumptuary laws. By pronouncing these words with a wry face such attempts may be discredited, that is, for a time. Meanwhile, however, every progressive community has gone right on passing sumptuary laws, in one form or another, sometimes to the great advantage of the people, sometimes to their disadvantage. Students are, therefore, becoming convinced that the consumption of wealth merits a great deal of study, that it is going to be controlled and directed by the state whether we like it or not, and that whether it is controlled and directed wisely or unwisely will depend upon how carefully and intelligently it is studied. In fact, a few are already beginning to discover that consumption is more important than production, exchange, or distribution-possibly more important than all three combined.