Imagens das páginas
PDF
ePub

goods for the use of others than on his efficiency in driving shrewd price bargains with all parties concerned. The gain of the individual is a differential gain. The person who has the advantage in a price bargain benefits from the other party's disadvantage. One business profits by taking trade away from another business. Profit of one enterprise may be the loss of some other party in industry. Every man is driving as shrewd a price bargain as possible in order to promote his individual prosperity. By exacting a little extra here and squeezing out a discount there, by getting the jump on one's rivals and acting first, by restraints of trade and petty agreements, it is possible to take advantage of chances to increase the money profit.

The relation of such differential money gains to the general social welfare has been a problem challenging the attention of economists. Adam Smith, being an exponent of laissez faire and of individual liberty, set forth the doctrine that as each man pursued his own gain he would be led as by an invisible hand to those acts which would redound to the good of all.1 Self gain would coördinate with social gain, because it would pay best to do those things which were of serviceability to society. Private gain was assumed to coincide with social gain. This relationship was said to be in accord with natural and inevitable laws. normal and expected thing was an identity between private gain and community gain. If in any case private gain deviated from social gain, the case was said to be exceptional. It was abnormal and unnatural. Any failure to unite service and private gain in the same transaction was viewed as an incidental disturbance of the smooth harmony of natural law. All things were believed to work together for the common good for those who intelligently sought their own self-interest.

In the course of time, much criticism has been aimed at this classic faith in the benign results of pursuit of selfish gain. At an opposite extreme, certain economists have set forth the basic assumption that private gain is public loss. The leading exponent of the extreme view is Thorstein Veblen. His position is taken as follows:

The business man's place in the economy of nature is to make money, not to produce goods. The production of goods is a mechanical process, incidental to the making of money; whereas the making of money is a pecuniary operation, carried on by bargain and sale, not by mechanical appliances and powers. The business men make use of the mechanical appliances of the industrial system, but they make a pecuniary use of them. And in point of fact the less

1 "Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage and not that of society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society. By directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it has no part in it. By pursuing his own interest he frequently promotes that of society more effectively than when he really intends to promote it." Wealth of Nations, Book IV, Chapter II.

use a business man can make of the mechanical appliances under his charge, and the smaller product he can contrive to turn out for a given return in terms of price, the better it suits his purpose. The highest achievement in business is the nearest approach to getting something for nothing. The less any given business concern can contrive to give for what it gets, the more profitable its own traffic will be. Business success means "getting the best of the bargain." Sabotage is indispensable to any large success in industrial business. The private gain which the business concerns come in for by this management entails a loss on the rest of the community, and the loss suffered by the rest of the community is necessarily larger than the total gains which these manœuvres bring to the business concerns.2

It will be noticed that Veblen practically reverses the propositions of Adam Smith. What Smith called disturbances and abnormalities, Veblen declares to be the regular and common phenomena of the money economy. A certain kernel of serviceability is conceded, but for the most part, Veblen considers business as rank parasitism. Private gain consists of "getting something for nothing," of restriction of output, of sabotage. According to Veblen, this is the natural and normal working of the price system. And the exception or abnormal is the occasional instance where service and private profit harmonize. It is unnatural to expect substantial good to accrue from unmitigated pursuit of private profit.

This scathing and ruthless criticism of business is supported by many authorities of a similar bent of mind. R. H. Tawney refers to it in his mention of "the sickness of an acquisitive society." Sidney Webb refers to it in the title of one of his books, The Decay of Capitalist Civilization.

The realistic truth would seem to lie somewhere between the views of Smith and Veblen. Business is neither all good nor all bad. Each of these authorities seized upon one phase of business and played that phase up to the exclusion of everything else. There is much more validity in Veblen's position than the average business man would be willing to admit. There is much more validity in Adam Smith's position than the average socialist would be willing to admit. After one finishes reading Adam Smith, he looks around for the harmony, equilibrium, and serviceability which nature is said to provide, and everywhere he sees poverty, discontent, warfare, ugliness, cheapness, and decay. After one finishes reading Veblen, he looks around for the iniquity, spoliation, and parasitism which naturally are said to result from the money economy and everywhere he sees beautiful homes, good schools, happy children, and the highest standard of living the world has ever known. Business is responsible for both sets of facts.

What conclusions may be drawn in explanation of pecuniary values? First, business consists of getting as much money as possible out of each deal. Value is represented in the price bargains made in a series of deals. In each deal, the attempt is made to exact as large a differ 2 The Vested Interests, p. 92 ff.

ential gain as possible. Second, this endeavor results in an underlying current of serviceability together with a surface current of disserviceability. Each business transaction results in a partial service and a partial disservice. The service aspect arises from the fact that goods reach the hands of consumers, and elevate their standards of living. The disservice aspect arises from the fact that restriction of output, excessive prices, and other differential gains are exacted. In trying to get as much money as possible out of each deal or bargain, certain individuals make a gain at some one else's expense, but at the end of the series of deals, goods are available for human use. Thus, the consequences of business are a compromise between parasitism with its differential gains and serviceability with its social gains.

The path of progress would seem to be in the direction of devising ways and means for insuring that money making shall more and more coincide with goods making. Better trade ethics, better commercial laws, better working rules, better business standards, hold out the prospect of improvement and development. The inherent workings of the money economy can be extended and amended so that private profit will be increasingly at one with public product.

Pecuniary Supply and Demand. In previous chapters, discussion of supply and demand has proceeded on the assumption that given quantities of each are known. But this assumption becomes too broad when the actual conditions of the money economy are encountered. Under these conditions, both supply and demand are unknown quantities. No one knows definitely what the supply of a certain commodity is, and no one knows definitely what the demand for the commodity is. Business men make estimates, guesses, and approximations, but their guesses often prove in the course of time to have been hopelessly wrong. The force of supply is what business men think the supply to be, and the force of demand is what they think demand to be.

The individual concern, of course, knows what its own supply is at any one time, but that knowledge is utterly insufficient as a guide to estimating the supply of all other concerns in the same branch of production or trade. If there are 100 different factories making a certain kind of cloth, each single factory needs to know not only its own supply, but the supply of the other 99 factories. Indeed, the scope of supply is broader than this, because it must comprehend producers in foreign countries as well. Possible imports or exports are a primary factor in supply. The single farmer knows only the amount of his own crop. But the price for his crop will be the result of the supply of all other farmers, not merely at home, but in other countries. International supply is as important as national or local supply. The individual producer faces immense difficulties in discovering what the general supply is at any given time. The task of collecting nationwide and. worldwide information is stupendous. On the demand side, the same perplexity appears. The individual can only guess at his demand, and must take into account demand for competitors' products as well as for

his own products. Under these circumstances, supply and demand are unknown quantities, and the best that can be done is to make the estimates as scientific and accurate as possible.

[merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small]

Monthly Review, Federal Reserve Bank of New York, May, 1925, p. 5.

† Seasonal variation not allowed for.

[blocks in formation]

To give quantitative precision to the concepts of supply and demand, it is necessary to employ the devices of statistics. Statistical measurement of output, stocks on hand, sales, and the like, make possible a

MONTHLY PRODUCTION IN BASIC INDUSTRIES. SEASONAL VARIATION ALLOWED FOR

[merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small]

* Monthly Review, Federal Reserve Bank of New York, May, 1925, p. 5.

« AnteriorContinuar »