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scrambling for wealth, therefore, which, to the casual eye, seems to be proof positive of the absolute dominance of the economic motive, may be largely an impulsive attempt to compensate for the absence of those non-economic ends which men really desire to serve.

V. CONCLUSIONS CONCERNING INCENTIVES TO ECONOMIC EFFORT

It may be objected that we cannot generalize safely from these illustrations, since the scientists described were unique in their noneconomic motives, and since the other instances cited were also of exceptional men. Is it not still correct to assume that the mass of mankind is concerned in their business relations only with acquiring wealth with as little effort as possible, or, in other words, with getting as much for as little as they can? Not wholly. It rather seems safe to assume that since these incentives are evidenced in such a high degree by some men, they are at least present to some degree in others.

We have indeed only to look about us to see innumerable instances of men and women in their work sacrificing their apparent financial interests for some other motive. Men and women go as missionaries to foreign countries for pitiably small stipends. Men enter the ministry where the economic rewards are slight, and doctors devote a large part of their time without reward to the poor. Scientists work in Universities or in government departments upon meagre salaries while publishing their discoveries and researches freely so that all may profit from them.

Nor does the following of the non-economic motive necessarily involve the attainment of a purity of moral character which the average man regards as impossible. There are indeed the saints of science, such as Faraday, Lister and Pasteur, but a large proportion of the great contributors to science have been of far coarser clay. Humphrey Davy for example was almost pitiably vain and jealous. He engaged Faraday originally as his assistant, but on a trip to the Continent he made the latter act as his valet and refused to go to a dinner where Faraday had been invited, on the ground that a servant should not be placed on an equality with his master. He later opposed Faraday's election to the Royal Society and used all his wiles in an unsuccessful effort to defeat him.

Agassiz again was greedy for applause and for fame. He often appropriated the work of assistants with little or no recognition of their work, refusing to allow the name of his colleague, Professor Clark, to appear as a collaborator on an important study in natural

history, although Clark had completed a large share of the work involved. Agassiz not only refused to recognize Clark as a joint author, but he would not even submit the case to impartial arbitrators as Clark desired, and when Clark publicly protested, Agassiz demanded his dismissal and secured it. The shock probably ultimately killed Clark.1

The mistake therefore should not be made of confusing the noncommercial incentives with pure altruism although there can be but little question that the great mass of men are capable of exercising far more altruism than at present they dare to do. Upon analysis, indeed, these incentives are disclosed as extremely variegated. From the biographical analysis that has been made, one might classify them somewhat as follows:

1. The desire to benefit humanity.

2. The fascination, or joy, of the work itself.

3. The desire to project one's own personality in the work at hand. 4. The desire to be esteemed by one's fellows in the same field of activity.

5. The desire for the esteem and approval of the general public. 6. The craving for notoriety. (This may be quite distinct from the two previous incentives.)

7. The desire for power over men and over things.

The evidence seems irrefutable that alongside the economic motive, which is undoubtedly real and powerful, there are in most of us, these non-commercial incentives as well, which are, at present, utilized only to a small fraction of their capacity. It is one of the problems of our social life to offer these desires an opportunity to function for the common good and to stimulate them in that direction. The false conception of the exclusively economic man has blinded us to these other characteristics of mankind and has helped to make our age one where the emphasis is laid upon acquisition. But if we know that there are these other sources of energy in men, we can then more confidently apply ourselves to the creation of devices and attitudes which will call them forth.

1 For the details of this unfortunate affair, see Marcou, Life, Letters and Works of Louis Agassiz, II, 53–5.

ECONOMIC THEORY AND THE

STATESMAN

by

ROBERT LEE HALE

1. Statesmen's Lack of Need for Theory under Laissez-Faire

191

2. Failure of Writers on Taxation and Trust Problems to Raise Underlying Questions of Economic Theory

192

3. The Need for a Theory of Distribution to Apply to the Trust Problem

192

4. The Problem of a "Fair Price"

194

5. The Test of a "Fair Return on a Fair Value"

194

6. Value of Property Dependent on Rates Charged 7. Question Whether Present Value is Itself Excessive

195

196

8. Accepted Economic Theory and the Value of Capital Goods under

Competition

197

9. Value of Durable Capital Goods and Cost of Reproduction (Less Depreciation)

200

10. Values of Land and Capital Goods above Cost a Symptom of Imperfect Competition

200

11. "Opportunity Costs" and Some Other Costs which Depend upon Earnings

201

12. Absence of a Standard Intermediate between Monopoly and Perfect Competition

203

13. Objections to Making Value Conform to Cost by Price Regulation 14. Fallacy of the Principle of Equality of Legal Treatment 15. Necessity of Compensation for Loss of an Opportunity in Another Field-Land Increment

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19. Justifiable Rates which Yield Unjustifiably High Earnings-Rationing "Recapture" of Earnings by Taxation

208

20. Does a "Recapture" Provision Burden Consumers for the Benefit of the General Public?

211

21. Would Argument against "Recapture Clause" Lead to Exemption of all but Law-Made Monopolies from Regulation?

212

22. What is the Criterion Determining Whether Regulation is to be Applied?

213

23. Have Property Owners "Produced" their Property Incomes?-The Wider Implications of Regulation

214

24. Wages and Salaries as "Opportunity Costs"

215

25. All Incomes the Result of Coercion, not Productivity

216

26. The Argument of Taxation Authorities against Need of Discussing Distribution

217

27. Some Faulty Assumptions in the "Ability to Pay" Theory of Taxation

218

28. The Admitted Inapplicability of the "Ability" Principle in Cases of Special, Measurable Benefit

219

29. The Need of a Theory for Guiding the Channels of Industry in Price Regulation

220

30. The Fallacy of Basing Rates of Joint Services on their Respective Costs

222

31. Classical Theory of Joint Cost and the Regulation of Rates 32. Public Expenditure and Artificial Channels of Industry

222

224

33. Conclusions

224

ECONOMIC THEORY AND THE STATESMAN

1. STATESMEN'S LACK OF NEED FOR THEORY UNDER LAISSEZ-FAIRE

The "political economy" of Ricardo and his school, as its name implied, was intended as a guide to statesmen; it was concerned with problems of government. But if its conclusions were correct, it was unnecessary for the statesmen to understand the subject, provided they accepted the conclusions, for the lesson it taught was apparently extremely simple of application-merely abolish all laws which interfere with economic processes. True, governments still had to levy taxes, but certain rather simple "canons" could be laid down without drawing on any of the more abstruse portions of theory. The principal steps to be taken in the application of "sound" theory were the repeal of such interferences with trade as the Corn Laws, and the abolition of whatever governmentally-created monopolies might still exist. With these steps taken, production would flow into those channels where it would satisfy the most wants, and the distribution of wealth would be as it ought to be; for an individual's income consists of prices charged for goods and services, and in the absence of law-made monopolies, prices tend to equal cost of production (including fair profit and interest); and "costs" were identified with sacrifices. There was, it is true, a qualification to this doctrine-for goods produced under conditions of increasing cost (diminishing returns) tended to sell, not for the cost of producing the identical article sold, but for the cost of producing the marginal portion of its supplythe part produced at the greatest cost. As a result, those who were fortunate enough to be able to produce at a cost below the marginal, would receive an income in excess of their costs of production (including normal interest and profits). The persons in this fortunate position were, according to Ricardo, the landowners, and the excess of their incomes above cost he designated "rent." Ricardo advanced no particular reason in justification of the private receipt of this "rent"; indeed he advocated measures which, he thought, would materially reduce it-namely the repeal of the Corn Laws. But he never suggested (as J. S. Mill did later) any other change in the

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