and someone must pay the cost. Some products apparently cannot be standardized, so there must always be a wide spread between the producers' and the consumers' prices.

A good illustration of the effect of standardizing a product early in the process of getting it from the producer to the consumer is found in the marketing of certain kinds of Western fruit. They are graded and standardized as soon as they leave the orchards. All subsequent inspection is therefore unnecessary, and the cost of getting them to the consumer is reduced practically to the physical cost of haulage and handling. This has notably reduced the spread between the two prices. Many other commodities, such as wheat, cotton, pig iron, and coal, are sold largely on grade rather than on inspection. In these cases the government has had very little to do with the standardization. Two recent acts of Congress, however, have brought the government definitely into this field as the fixer of standards of quality. These are the Cotton Futures Act and the Grain Standards Act. Both give the Secretary of Agriculture power to establish grades and to enforce their use in the regular channels of trade. A number of states also have passed grading laws of various kinds. Four New England states have passed a uniform apple-grading law, defining the contents of a standard barrel, describing the various grades of apples, and imposing penalties upon all departures from the standard prescribed.

Such legislative acts cannot be called in any true sense interferences with trade. They are designed to increase the freedom with which commodities may circulate. They are somewhat analogous to the work of the traffic policeman on a crowded corner. He may exercise authority and interfere occasionally with an individual's movements, but the result of his so-called interference is greater freedom of traffic.1

Brands and trade-marks. Brands, trade-marks, and other selling devices of this general description would be useless or

1 Compare the article by the author, on "Standardization in Marketing," in The Quarterly Journal of Economics, Vol. XXXI, No. 2, pp. 341–344.

impossible without some kind of standardization in production or grading of products. Where these services are properly used, they are an aid to the buyer as well as to the seller. They help him to know what he is getting and enable even the inexpert buyer to buy safely.

Advertising and salesmanship. From the point of view of the seller of any commodity there is not much doubt as to the efficacy of advertising and expert salesmanship. Serious doubts have been expressed, however, as to the social advantage of what may be called high-pressure selling. Why, we are asked, should we be subjected to all the arts of the expert salesman and advertiser, who are doing their utmost to persuade us to spend our money for things which we do not need? On the other hand, it is replied, why should not every art of persuasion known to the expert be brought to bear upon men to lead them to do what they ought to do? This is what evangelism, moral leadership, and all sound instruction amounts to. If we are to allow freedom in the exercise of the arts of persuasion at all, it will be difficult to draw the line. Who shall act as our censor and permit one man and forbid another to persuade people to do what he wants them to do?

Except in extreme cases this argument is unanswerable. In the case of immoral acts, or any act which the moral sense of the community condemns, it is obviously as immoral to persuade people to commit those acts as it is to commit them. If there is anything which men clearly ought not to buy, it is equally clear that men ought not to advertise it or try to sell it. But the difficulty, except in extreme cases, is to decide just what things it is proper, and what it is improper, to buy.

It is quite clear, however, aside from all questions of legal conduct, that much of our advertising is a waste of human energy. Sometimes it is a service to a consumer to apprise him of the fact that he can buy something which he has long wanted, and to tell him where it can be had. In most cases, however, advertising serves no such purpose. One does not

need an advertisement to apprise him of the fact that soap can be purchased. The only purpose served, in all such cases, is to persuade people to buy one brand rather than another. Our helplessness in such a situation is revealed to us when we consider that it would take a great deal of campaigning, accompanied by advertising and high-pressure persuasion, to work up a public sentiment hostile to advertising. We might easily waste more energy in this campaign than is now wasted in advertising.

Political campaigning. Socialists are in the habit of pointing to the wastefulness of advertising as one of the costs of competition. They do not point out, however, that a political campaign is just as wasteful as a selling campaign. The candidate for office advertises his candidacy and uses high-pressure persuasion to get people to vote for him. Since the extension of government power and authority would multiply government offices, it would necessarily multiply the number of campaigners and greatly increase the waste of time and energy used up in political campaigns. Every campaigner, even he who is campaigning for socialism, is doing much the same kind of work as is done by the expert advertiser. He is using high-pressure persuasion to get men to do things which they would otherwise not do.

It looks as though we should have to regard persuasion in all its aspects, except persuasion to do that which is morally condemned, as a necessary cost of freedom. A despot could suppress all persuasion, in politics as well as in salesmanship, but a free people can scarcely get along without it. Freedom is in some respects costly, but it is worth all it costs.

CHAPTER XXVII

ECONOMIC CRISES

Financial crises. One of the most important and most puzzling of all modern economic questions is that of the frequent recurrence of financial crises and general industrial depressions. A financial crisis is an occasion when the money market becomes suddenly demoralized, confidence disappears, and credit shrinks. Everyone to whom money is owed wants it at once, but no one wants to let go of any money in his possession, for fear that he may not be able to get any more. Besides, there does not seem to be money enough to pay off existing debts.

In the chapter on Banking it was pointed out that a large part of the business of the world was done on credit, without the actual handling of money. If you will imagine a group of men doing business with one another, where each one trusts every other, you will see that a large amount of business can be done with a ridiculously small amount of money. Many transactions will be carried on by means of promises to pay money instead of with the money itself. Many of these promises will be balanced against one another and canceled without the use of any money. In other cases the money will be used merely to pay the balances. But if something should happen to destroy confidence, so that no one would accept promises, but everyone demanded real money, there might not be money enough to go around and make the necessary payments. In that case business would have to slow down, and only as much business could be done as could be done with the small amount of money available. If, in addition to this, everyone held on to all the money he could lay hands on, for fear that he might

not be able to get any more, even the limited amount of money in circulation would move slowly, and business would have to slow down correspondingly. A swift dollar may pass from hand to hand many times in a day, and in this case it will do a large amount of business; but a slow dollar passes from hand to hand only a few times a day, and does a small amount of business.

Industrial depressions. An industrial depression is usually more deep-seated than a financial crisis and usually lasts for a longer time. It is a general stagnation of production because of an inability to get satisfactory prices for products. Various explanations, some intelligent and some absurd, have been offered. Overproduction is one of the most common and least intelligent. There may be such a thing as disproportionate production, but such a thing as general overproduction is a physical impossibility. The production and supplying of one thing is a demand for something else; the more production, the more demand; but if some things are produced and offered for sale, and there is no demand for them, it means either that those few things are overproduced or that the other things which might be exchanged for them are underproduced.

The overproduction theory. One phase of the overproduction theory of industrial depression is that wages are so low that the laborer is not able to buy his own products. It is argued that this results in an overproduction and glut on the market. There are many excellent reasons why wages should be higher than they are, but this is not one of them. So far as its effect on the general purchasing power of the community is concerned, it makes no difference whether wages are high and rents, interests, and profits are low, or whether wages are low and rents, interests, and profits are high. If the laborer gets a small share of the production of a given industry, and the managers, landowners, and capitalists get a large share, these have a large purchasing power and the laborer a small purchasing power. The value of the whole product of every