duction is wholly subordinate to profit making in the mind of business. The money economy controls, guides, and dominates the production economy. The three auxiliary factors in production may be summarized as follows: First, management, which coördinates both the physical factors and the pecuniary factors, which is a highly specialized form of mental labor, and which is largely divorced from ownership; second, government, which is not a deadweight burden, but is a productive agent, indispensable to the furtherance of business enterprise; third, money, which controls the kind and amount of production, and animates the business system of private profit. The Entrepreneur.-Some one has to take the initiative in business. enterprise. Some party has to hire the labor, procure the capital, provide the raw material, sell the product, disburse the expenditures, and determine the profit or loss. Whoever assumes this initiative is the entrepreneur, or enterpriser, in business. He is often referred to as the capitalist, the captain of industry, the employer, the business man. Whatever his title, the contribution which he makes to industry is definite. He promotes, organizes, and governs the enterprise. He takes the initiative, the responsibility, and the risk. In some enterprises, the entrepreneur is both owner and manager. This is particularly true of those enterprises which have not yet been brought under the régime of corporate ownership. The single ownermanager concentrates in his own hands the risk and responsibility of the business. The matter is more complex in those enterprises which have been taken over by the corporation. Managerial responsibilities are scattered between stockholders, bankers, boards of directors, consulting engineers and lawyers, and executive officials. Ownership is scattered among stockholders great and small. The real captain of industry in such a case may be the president, or some member of the board of directors, or a large stockholder, or an outside financier, or all of them taken together. The initiative, responsibility, and risk are greatly complicated, and the functions of the entrepreneur are highly scattered and highly specialized. But no matter how elusive the enterprising function may be in the modern corporation, nevertheless the fact remains that the genius for organizing and operating the concern exists somewhere. The function of the entrepreneur remains, however much it may be split up and obscured. The function is just as definite and just as indispensable as before. Some one has to take the initiative, to "go ahead," before the going concern comes into being. The complex entrepreneur of the corporation régime performs the same economic service in kind as the simple entrepreneur of the owner-manager type. Large Scale Production.-The machine technology has affected the size of the typical business unit. In the pre-machine era, the typical business unit was a small family or other group of laborers using a few simple tools on a small amount of raw material. In the machine era, the typical business unit is an aggregation of hundreds or thousands of laborers, using a mass of highly expensive machinery and equipment on a great volume of raw materials. Manufacture more perfectly reflects this tendency toward expansion than any other branch of production. There the factory is the typical creation of the machine process. Factory production is for the most part large scale production. The degree to which large scale production prevails varies greatly from industry to industry, from plant to plant in the same industry, and from country to country. In the United States, anthracite coal mining is highly concentrated, but bituminous coal mining is highly scattered among relatively small companies. Manufacture of iron and steel is an extreme of large scale production, but manufacture of textiles is relatively small scale production. Retail stores retain in large measure smallness of size, but even retailing is succumbing more and more to the large scale activities of the chain store, the department store, and the mail order house. Even in an industry which is marked by large scale production, there appear many independents which operate successfully on a small scale. The independent small manufacturer is no rarity, but is numbered by the hundreds of thousands. Differences in size between plants in the same branch of production are everywhere to be found. Finally differences between countries are often pronounced. The United States has upwards of 30,000 separate banks, whereas Canada has 17 large banks with thousands of branches. Banking in England has undergone tremendous consolidation, but banking in the United States has resisted a proportionate concentration. German consolidation of coal, iron, and railroad industries has gone to an extreme probably unmatched by any other country. However widely industries may differ in large scale production, one fact is definite, that industry in general is operated in much larger units under the machine régime than under any previous régime. The machine technology demands bigness in the unit of production. The main reasons for large scale production may be summarized as follows: 1. It makes possible an economical utilization of expensive machinery and other capital equipment. The single family or the small producing group cannot afford to purchase costly equipment which would of necessity be idle and unproductive a great part of the time. 2. It makes possible a full utilization of the division of labor. The large concern can hire experts in each department, and can secure the best brains and the best ability for each important task. It can divide. the tasks of common labor into narrowest units, and so make possible the use of automatic machinery and standardization of processes. 3. It can economize by the utilization of by-products. The prevention of waste of any part of the product is more effective where the byproduct can be dealt with in large quantities. 4. It can take greater advantage of applied science, laboratory research, and experimentation. 5. It can develop the market to better advantage, through buying and selling in quantities, through savings in advertising and financing, through intensive sales effort. Economic Significance of Power.-In 1924, the energy contributed to production by firewood, work animals, water power, coal, oil, and natural gas amounted to 25,000 trillion British thermal units. Of this total, coal supplied 65 per cent, oil and gas 22 per cent, wood 6 per cent, water 4 per cent, and work animals 3 per cent. Water and coal in turn give rise to electrical power, which in 1924 amounted to more than 55 per cent of the total power used by manufacture. The tendency has been toward an increase in the proportion of electrical energy and of oil energy. Particularly, the electrification of industry has been of paramount importance, and promises to become steadily more prevalent in the future. The age of electricity emerges from the age of coal. The technology of electrification involves erecting of large generating and central power stations, near to coal mines or waterfalls, and mass transmission of the energy, under high voltages and over great distances. Such distribution of energy makes possible a decentralization of overcongested manufacturing areas. It cheapens the use of energy and lowers the cost of production. It economizes our natural resources. It alters materially many of the most important features of the present technology of production. Mechanical energy is of the utmost economic importance because the availability of such energy for the laborer greatly increases his output from a given expenditure of effort. The history of increased production per worker is closely interwoven with the history of increased horsepower per worker. In general, the efficiency of the worker is in direct proportion to the amount of mechanical energy at his disposal. The growth of mechanical energy in industrial use is shown by the following table: The most significant aspect of this data is that the horsepower per worker has more than doubled during a quarter of a century. The worker, although laboring fewer hours per day, nevertheless turns out 4 For further discussion of the advantages and disadvantages of combination, see the chapter dealing with Management. a greater product. Not only is the output greater, but the technique of the labor itself is materially altered. The laborer has come more and more to confine his efforts to guiding and controlling the mechanical energy employed. His effort is directed to pushing a button, setting a gauge, moving a switch. As observed by an engineering authority, "The modern way to use the energy of a man is to employ it in a way similar to the little detonator of the big explosive-the little charge sets off the big one and does an amount of work far in excess of its own capacity."5 Science, Research, Invention.-Improvements in modern technology are almost wholly due to specialized scientists, inventors, engineers and statisticians. The technicians are always in quest of something new and better. In the field of applied science, the status quo is not the ideal. Rather, the ideal is discovery, development, progress. For the most part, invention by some individual in his small private workshop is a thing of the past. The private struggle for invention associated with the names of Watt, Cartwright, and other pioneers, has been superseded by large scale research, in specially equipped laboratories, financed by some group or organization. In the modern laboratory, invention in the popular sense of the word is unknown. Invention viewed as a sudden inspiration to create an utterly new mechanism is purely a popular myth. Invention is not so heroic and dramatic as that. In fact, the research specialists of today practically eliminate the word "invention" from their minds. They think only of "improvement" in a given machine or process. Scientists and mechanics are attempting to discover ways and means of improving old machines and old processes. A single part to a locomotive may be the culmination of 10,000 prior improvements in that particular part. The object of research is to carry the improvements one step further. The sensational invention of a wholly new device is rare indeed; the development and improvement of a device already in use is a commonplace industrial happening. The trail of technological progress is marked by improvements and developments in a gradual, accumulative forward movement. Four main types of research agencies are in operation: university, privately endowed, governmental, and corporation. Some duplication occurs in any such classification, but fundamentally these four classes. are distinct. (a) University Research. The universities and technical schools contribute to industrial research in three major ways: first, by educating students who will carry on research in industrial and governmental laboratories; second, by carrying on specific researches in the university laboratories at the request of industries which feel the need of such investigations; third, by the scientific studies made by the faculty staff for the advancement of scientific knowledge. 5 Thomas T. Read, Federal Bureau of Mines, Address at Georgetown University, 1924. In regard to the first of these contributions, the schools of higher education act as feeders to the research personnel of all other laboratories. In all industrial laboratories, a large percentage of the workers are graduates of universities or technical schools, and in many such laboratories a strict prerequisite for employment is a degree from an appropriate school of higher education. The Schenectady laboratories of the General Electric Company employed in 1924 about 90 college graduates and about 25 men having doctor's degrees. The Department of Development and Research of the Bell Telephone system employed more than 1,000 college graduates, picked from more than 100 American colleges. The Bureau of Standards in Washington, D. C., employed more than 400 men holding college degrees in science, technology, and engineering. The training in scientific method and the instruction in scientific principles which the universities give are invaluable to the staffs of scientists employed in all non-university laboratories. In regard to the second university contribution, corporations often employ the services of a professor, either part time or whole time, for research in the university laboratory or in a laboratory provided by the corporation itself. A more common method of direct use of university facilities by corporations is the establishment of fellowships for special graduate research in subjects of industrial interest. Even corporations which have laboratories of their own find it advantageous to turn over certain problems to the universities and technical schools. The Du Pont Company of Delaware in 1923 maintained, in addition to its own laboratories, research fellowships at 16 different schools. Many small enterprises which do not feel able to finance independent laboratories, with their costly apparatus and highly paid scientists, are able to finance technical fellowships at the universities. The university supplies the overhead of laboratory organization and equipment, and the industry bears the direct labor and material cost of investigation. In 1923, it was estimated that over 580 scholarships and fellowships for advanced research were in operation. These ranged in value from $100 to $2,000 annually. In regard to the third form of university research, the faculty of the university carry on scientific studies for the advancement of knowledge, for the extension of pure science, and for the application of science to industry and commerce. Although the universities have made many notable practical achievements in applied science, nevertheless their most distinctive and important achievements lie in the broader field of pure science. The professor in a university laboratory is freed from the atmosphere of commercialism and the demand for immediate cash results. He can pursue knowledge for knowledge's sake. He can make his main objective the enlargement of the boundaries of truth. This environment has proved to be the proper stimulus for the more profound investigations of science. The researches of Faraday in electric induction and of Thomson in the electron and the vacuum tube yielded the broad scientific principles which underlie the electrical |