and energy, on the one hand, or some form of material goods, on the other. Find an individual who experiences no lack or scarcity of anything, and I will show you an individual who has no need for economy; but you will look a long time before you find him.

Getting and spending. In the practical everyday life of the average person problems of economy are mainly focused on the problems of getting and spending, of income and expenditure, or of business and the household. If one's income is less than one would like to have it, it means that one's desires run beyond one's income. Such an individual therefore tries, first, to increase his income and, second, to get as much good out of it as he can; that is, to spend it as wisely as he knows how. This is true not only of every individual and every family but also of every organization, even the State itself, and it is even true of all the people as distinct from their government. The greater part of the time and energy of the people of this world is spent on these matters, but it is spent in a great variety of ways.

A glance at the diagram at the beginning of this chapter will give one a general idea of all the forms in which the problem of income and expenditure presents itself. The reader will get, at the same time, an idea of the principal branches of the great science of economics, for economics is, in one aspect, simply the study of the problem of income and expenditure. This problem is in turn the problem of economizing time and energy, on the one hand, and goods, on the other. Another way of saying it would be that it is the effort to make things that are scarce go as far and accomplish as much as possible.

Economics, household management. Originally the word economics meant "the principles of household management." It comes from the two Greek words, oikos, a house," and véμw, manage." It was simply a study of the principles of household management. In Xenophon's treatise on this subject he discusses the management of a simple rural household, in

which the business that furnishes the income is united with the home in which the income is spent or utilized. In fact, it was the kind of rural household that some men now living can still remember, where nearly everything consumed in the household was produced on the farm, so that there was comparatively little buying and selling. In such a household the problems of income and expenditure, of business and home life, are not very widely separated. The income was made up of the products of the farm and not of the money for which they were sold, because they were not sold at all. The expenditure, if such it may be called, was merely the utilization of those products, and not the spending of money, because there was no money to spend. In the broadest sense, as we shall see a little later, that is what constitutes the income and expenditure of the people as a whole. Individuals may buy and sell among themselves, but the people as a whole consume their own products. In recent times, especially in our cities, the business that is the source of income is so widely separated from the home, where the income is utilized, as to make them seem like different problems altogether. In fact, we now have two distinct subjects, or branches, of private economics, known respectively as business economics and home economics. That these two branches, which the Greeks regarded as parts of the same subject, are now so sharply separated is a sign that we have gone a long way from the condition in which business and life were united, toward a condition in which they are to be completely divorced. This should make us ponder seriously, because, while it is doubtless in many ways a good tendency, it is in other ways a bad one.

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 necessary 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," also wrote 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 must also 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

autó

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 has 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 could also 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