taken as adequate guides until statistical verification is more complete than at present.20

Conclusion.-Government serves productive ends in the modern economic organization. It is not a burden, any more than any necessary expense of production is a burden. Yet, in order to do its productive work, government must spend.its income for right purposes and must derive its income by right revenues. The purposes of expenditure and the economic effects of its revenue measures are the criteria of government productivity.

BIBLIOGRAPHY

ADAMS, H. C., The Science of Finance.

BASTABLE, C. F., Public Finance, 3rd edition.

BOGART, E. L., War Costs and Their Financing.

BULLOCK, C. J., Selected Readings in Public Finance, 3rd edition.

BUREAU OF THE CENSUS, Monographs, Wealth, Debt and Taxation.

BUREAU OF THE CENSUS, Financial Statistics of States, Financial Statistics of Cities.

DALTON, H., The Principles of Public Finance.

ELY, R. T., Outlines of Economics, 4th edition, Chapters XXXI-XXXIV.

FISK, H. E., The Inter-ally Debts.

FORD, H. J., The Cost of Our National Government.

FRIDAY, DAVID, Profits, Wages and Prices, Chapters XI-XII.

HAIG, R. M., The Taxation of Excess Profits in Great Britain.

HOBSON, J. A., Taxation in the New State.

HOLLANDER, J. H., War Borrowing.

JENSEN, J. P., Public Finance.

LUTZ, H. L., Public Finance.

The State Tax Commission.

MELLON, A. W., Taxation, the People's Business.

MONTGOMERY, R. H., Income Tax Procedure.

NATIONAL INDUSTRIAL CONFERENCE BOARD, Report No. 55, Taxation and No

tional Income.

Report No. 64, Tax Burdens and Exemptions.

NATIONAL TAX ASSOCIATION, Annual Proceedings.

PLEHN, C. C., Introduction to Public Finance, 4th edition.

POST, L. F., The Taxation of Land Values.

POUND, ROSCOE, An Introduction to the Philosophy of Law.

The Spirit of the Common Law.

and others, The Rational Basis of Legal Institutions.

SEAGER, H. R., Principles of Economics, 3rd edition, Chapters XXVI-XXVIII. SELIGMAN, E. R. A., Essays in Taxation, 9th edition.

The Incidence of Taxation.

The Income Tax.

STAMP, SIR J. C., The Principles of Taxation.

Wealth and Tarable Capacity.

TAUSSIG, F. W., Principles of Economics, 3rd edition, Volume II, pp. 505-62. THOMPSON, C. D., Public Ownership.

THOMPSON, W., Federal Centralization.

WEST, M., The Inheritance Tax.

20 J. A. Hobson has carried the analysis of margins and surpluses further than any other modern writer, and has proposed a new system of taxation based upon surpluses. See his books, Taxation in the New State and The Industrial System.

PART VIII

ECONOMIC CONTROL

CHAPTER XXXVI

PUBLIC CONTROL

Economic Adaptation.-All problems of economic improvement are fundamentally two-sided; on the one hand, they necessitate the alteration of institutions the better to fit human nature; and on the other hand, they necessitate the discipline and education of human nature the better to fit institutions. The solution of economic problems requires a blending of human nature and economic institutions. Economic progress involves always the basic element of adaptation between two prime factors, men and institutions. W. E. Hocking refers to man as "the only animal that deliberately undertakes, while reshaping his outer world, to reshape himself also." The human equipment needs discipline and guidance in ways which are not degrading or weakening, and needs opportunities for expression in ways which represent a fulfillment of the primary human impulses. At the same time, institutions should be made to function in such ways that human nature will be neither outraged nor pampered, but will be evoked, expressed and satisfied within social bounds.

Every student comes to economic discussions with certain first principles which give him his orientation for economic thinking. It is these first principles, these elementary conceptions mostly born of family and social traditions, which need scientific examination. As Justice Holmes profoundly observes, "To have doubted one's first principles is the mark of a civilized man." The first principles of the progressive and of the conservative differ deeply, and in no way more fundamentally than in this respect the conservative-minded thinker inclines to give presentday institutions the benefit of all doubts and to assume that liberals or radicals, mild or extreme, need discipline to make them conform; whereas the progressive thinker inclines to give human nature the benefit of all doubts and to assume that institutions should be reshaped to permit human nature more freely to follow its own bent. Conservatives tend to believe that human nature is wrong when it is unruly or dissatisfied; progressives tend to believe that laws, organizations, systems, institutions, are wrong when men become impatient with them.

wishes to reshape human nature by new disciplines; the other to reshape institutions by reconstruction.

Economic adaptation between these two factors may, of course, come about in many ways,-by mere chance, by blind drifting, by coercion, by pacifistic surrender, by coöperation, by rebellion, by intelligent planning. The economic order is today so stupendous in its proportions that individual thinkers all too often look upon the course of adaptation with a fatalistic attitude, and resign themselves to the inevitability of economic evolution with an optimistic illusion that all will turn out for the best some day anyhow. Such attitudes lie behind the frequent blunders and futilities in modern economic adjustments. Economic thinking worthy of the name must conform with the viewpoints and conceptions which are insisted upon by the reconstructed philosophy of recent years,,—it must be devoted to creative adaptation. Adaptation which is safe and trustworthy is an act of will, based upon an intelligent analysis of facts. It comes from "creative intelligence.' To effect a decent balance in reshaping human conduct and economic institutions calls for the most elaborate scientific investigations to ascertain the pertinent facts, for experimentation with alternative courses of economic policy, for unlimited research by private experts and public commissions, for the invention of theories and hypotheses to be tried out and proved or disproved, for the creation of new principles of human behavior, for the discovery of new solutions of pressing economic problems. Adaptation which is sound and wise has to be wrought out by the deliberate effort of creative minds. Adaptation involves a technique of inquiry, research, experimentation, scientific guessing, reflection, observation, analysis, diagnosis, inference, hypothesis, testing, and verification. In modern society there are specialists and experts, responsible leaders, who are, or should be, adepts in the use of this technique, and upon them naturally falls the burden of formulating the lines of economic adjustment in their broadest and deepest aspects. But any overreaching in the direction of specialization, on the assumption that one class in society should do all the planning, and another class all the handwork and none of the planning, would be dangerous. In his own individual way and within the limit of his powers, every man deserves the responsibility of planning, suggesting, imagining, and few indeed are the members of society who, under proper encouragement, lack that spark of curiosity which seeks satisfaction in ideas, plans, and suggestions. The caliber of the average individual will be measured by the degree to which the latent powers of his human equipment are called into creative use. If he is a thing accustomed to act always under orders, a being whose thinking is done by specialists only, his human equipment is bankrupt in regard to those qualities of personality which can arise only from self-expression and self-assertion. So in his individual manner each person in economic society must be somewhat creative and original and curious if he is to be the best possible member of society.

If the mass of individuals are to have originality and creative ability,

each individual must be encouraged to make wise new adaptations to his immediate environment every day of his life. Not obedience and unquestioning conformity, but individual creative adaptation is the first law of life. The individual must be free and able to plan improvements in the system under which he moves and works, and he must be constrained to that measure of self-control and self-direction which is necessary to keep him in tune with his immediate universe. The words of John Dewey on this matter are deeply suggestive: "The best guarantee of collective efficiency and power is liberation and use of the diversity of individual capacities in initiative, planning, foresight, vigor and endurance. Personality must be educated, and personality cannot be educated by confining its operations to technical and specialized things, or to the less important relationships of life. Full education comes only when there is a responsible share on the part of each person, in proportion to capacity, in shaping the aims and policies of the social groups to which he belongs. This fact fixes the significance of democracy. . . Human nature is developed only when its elements take part in directing things which are common, things for the sake of which men and women form groups-families, industrial companies, governments, churches, scientific associations and so on. . . . When the liberating of human capacity operates as a socially creative force . . . making a living, economically speaking, will be at one with making a life that is worth living."1

As soon as the average person comes face to face with this attitude toward economic problems, he naturally inquires: What is your solution? What is the remedy for the difficulties of the economic order? What is your answer to the multitude of economic questions which arise. on every hand? This kind of inquiry is usual and natural. Men are in search of an ultimate solution for the whole thing. They suppose that of course each man ought to have a theory about the way out of all troubles. Then he could say to everybody, Now if only you would adopt this scheme, all would be well. If only you would put this solution into practice, nothing else would be necessary. And the only trouble with such ultimate solutions is that people simply do not adopt them. Just that is the futility of these single ultimate remedies based upon an "if only." They assume a human behavior which is contrary to fact. It might as well be put bluntly and boldly that there is no one simple solution, and those people who pretend to have one are obliged to live in an imaginary world where everything would be all right if only people would not do the things which people do and if only men would behave in those ways in which they won't behave. Realists who are willing to deal with actual human nature and actual institutions find that we are confronted with a great bundle of economic problems, and bundles within the bundle, and bundles within the bundles. Each requires investigation, inference, experimentation and creative imagination for its solution. Problems of coördination and correlation between all the bundles 1 Reconstruction of Philosophy, pp. 209-211.

of problems will come to the front. The world of economic problems is teeming with infinite diversity, peculiarity, individuality, variety, and the realistic mind seeks to adapt each to each and each to all. This attitude is always a disappointment to many minds, because it gives no rock of ages to step foot upon, but instead makes every man an explorer, a pathfinder, a trail blazer, a discoverer. If it has less certitude, it at least has infinitely more practicality. The specific implications of this attitude are so ably stated by Dewey that it is well to quote him again: "Just what response does this social arrangement, political or economic, evoke, and what effect does it have upon the disposition of those who engage in it? Does it release capacity? If so, how widely? Among a few, with a corresponding depression in others, or in an extensive and equitable way? Is the capacity which is set free also directed in some coherent way, so that it becomes a power, or are its manifestations spasmodic and capricious? Since responses are of an indefinite diversity of mind, these inquiries have to be detailed and specific. Are men's senses rendered more delicately sensitive and appreciative, or are they blunted and dulled by this and that form of social organization? Are their minds trained so that the hands are more deft and cunning? Is curiosity awakened or blunted? What is its quality: Is it merely esthetic, dwelling on the forms and surfaces of things, or is it also an intellectual searching into their meaning? . . . What is needed is specific inquiries into a multitude of specific structures and interactions." 2

The discussion of economic adaptation may be conveniently presented under three main headings: Public Control, Economic Radicalism, Economic Democracy.

Public Control.-The major economic problems, almost without exception, exhibit phases which refer to some form or degree of government control, and the major policies of modern government almost without exception exhibit phases which refer to economic conditions. So politics abounds with economics and economics abounds with politics. The extent to which government should interfere in business is often a matter of bitter debate, and each separate problem has to be disposed of on its own merits. Those economists who are not averse to a liberal measure of governmental control look upon government policies not primarily as an interference with business conditions, but rather as a means of smoothing out troubles and injuries arising from unrestrained business adventures, and of aiding and guiding business toward higher standards. The function of government is not to meddle and intrude where it is not needed, but to coöperate and constrain and direct and reconstruct where economic conditions fail to right themselves. Referring to this positive responsibility of government, a thoughtful political scientist says, "The most striking change in the political organization of the last half century is the rapidity with which, by the sheer pressure of events, the state has been driven to assume a positive character. . . 2 Reconstruction of Philosophy, pp 197-198.