The Meaning of the Business Cycle-Duration of Business Cycles- Phases of the Business Cycle-Some Major Factors in Cyclical Changes-Some Theories of Business Cycles-The Stabilization of THE BALANCE OF INTERNATIONAL PAYMENTS The Nature of International Payments-Demand and Supply of For- eign Exchange-The Composition of the Balance Sheet of the United States-Historical Significance of the Balance Sheet of the United States Classes of Bills and Documents-Methods of Financing For- siderations. MONEY AND FOREIGN EXCHANGE SINCE 1914 . The Par of Exchange Under Irredeemable Paper-Gold Prices of Commodities-Gold Shipments and Automatic Correctives-Tables of Exchange Rates and Prices-Fluctuations of Exchange Rates-Auto- matic Correctives of Fluctuations-Divergence of Export Prices from Domestic-The Stabilization of Exchange-The Place of Money and of The Importance of the Machine Technique The Nature of the Invest- ment Process-Effects of Foreign Investment upon Foreign Trade- Economic Functions of Government in Export of Capital-The Spread of the Machine Technology Throughout the World-Benefits and Dan- THE PRINCIPLES OF INTERNATIONAL TRADE The Principle of Comparative Advantage-The Principle of Mutual Advantage-Geographical Distribution of Trade-The Commodity Dis- tribution of Trade-The Relative Importance of Foreign and Domestic Trade Some Applications of the Principles of Advantage-Interna- The Principle of Pecuniary Advantage Protection and the Tariff- Free Trade The Method of Tariff Making-Recent Tariff Tenden- cies The Tariff and the Cost of Living-The Tariff and Agriculture— The Tariff and Prosperity-Trade Bargaining and Discrimination- Agencies of Foreign Trade Competition-The Control of Essential Raw TAXATION AND THE PRODUCTIVE FUNCTIONS OF GOVERNMENT The Productive Character of Government Activities-Increase of Gov- ernment Expenditure Public Revenue Other Than Taxation and Public Credit-Tests of Justice in Taxation-The General Property Tax- TAXATION AND THE PRODUCTIVE FUNCTIONS OF GOVERNMENT (Continued) 725 The Sources of Federal Revenue-Internal Excise and Consumption Taxes Customs Duties, or the Import Tariff-Income Taxes-War and Excess Profits Taxes-Inheritance and Gifts Taxes-The Increase of Public Debt-The Fiscal Budget-The Shifting and Incidence of Taxa- Economic Adaptation-Public Control-General Regulation of Busi- ness-Governmental Control of Labor-Reform-Public Opinion and The Economic Difficulties Confronting Socialism-The Difficulties of Socialistic Production-The Difficulties of Socialistic Consumption- The Difficulties of Socialistic Distribution-The Difficulties of Social- FOREWORD By WESLEY C. MITCHELL Director of Research, National Bureau of Economic Research Economics started with the discussion of practical problems, such as lending at interest, just prices, abuses of coinage, the international flow of the precious metals, labor policy, and poor relief. By the Physiocrats and Adam Smith these miscellaneous discussions were given a measure of unity and system. Ricardo pressed further in the same direction. In his hands political economy became a "science," composed of "laws" arrived at mainly by "deduction," but supposedly capable in large part of "inductive verification," and certainly applicable to the guidance of policy. The first text book of economics, published by James Mill in 1821, pushed this view of the subject to extremes, demonstrated its theorems in a manner reminiscent of geometry, and scarcely mentioned practical applications, though the author was a radical reformer who thought science should be utilitarian. Mill's more famous son shared most of his father's conceptions, but when his turn came in 1848 to write a book on economics, he deemed it wise to combine the discussion of theory and practice. His treatise lived up to its title: "Principles of Political Economy with some of their Applications to Social Philosophy." Later text books and treatises have oscillated between the models set by the two Mills. Among the recent introductions to economics there are books as rigidly confined to "pure theory" as James Mill's Elements, and books which lay even heavier emphasis upon practical applications than did John Stuart Mill's Principles. Since 1848, the subject itself has become more difficult to introduce to laymen on either plan. The parent stock of classical political economy has split into several types of theory which no two experts classify alike. Marginal analysis, neo-classicism, the psychological school, pecuniary logic, institutional theory, welfare economics are some of the names given to some of the recognizable types. While the differences which set off these varieties are primarily differences concerning the relative importance of problems or methods, it is hard to find a corps of doctrines which can be presented to the public as accepted by all authorities. The wider his intellectual sympathies, the more does the writer of a new text feel that he is making, tacitly or explicitly, invidious choices among the types of theory which are candidates for recognition. Nor can economic theory in any form claim to represent economic science as confidently as it could in the days of James or John Stuart Mill. Much of the best constructive work done by contemporary economists is concerned with practical problems. Corporation finance, marketing, taxation, labor problems, business cycles, farm economics, conservation, transportation, social insurance-one might make a long list of topics in which the increasing thousands of professional economists are "specializing." Of course "specializing" might mean the application of certain established laws to numberless special cases. A classical economist of Ricardo's generation would have taken that meaning for granted. But few of our specialists find ready-made theories which they can apply to their problems. One who reads monographs usually gets the impression that their writers have made slight use of economic theory. On the contrary, one often has an uneasy feeling that the conclusions of the monographs call for revisions in the theoretical treatises. Both the experimenting with various types of economic theory and the intensive study of practical problems without much heed to received doctrine are signs of intellectual vigor. They are incidents in that great process of trial and error by which mankind is slowly acquiring knowledge of itself. But progress, even scientific progress, is attended by confusion. No economist can keep abreast of the times. The specialists themselves need to be introduced to the subject afresh at intervals which grow shorter as progress in other fields than their own becomes more rapid. And the very circumstances which make it difficult to write a good introduction to economics make the need of a good introduction more pressing. Professor Edie's effort to supply this need should be particularly helpful, because he has tried to present economics, neither as a body of abstract principles, nor as a series of separate problems, but as a growing body of organized knowledge about one aspect of human behavior. The world he observes and analyzes is the world in which we are living together, coöperating and competing with each other. To make his observations accurate he relies largely upon statistics. To guide his analysis he draws upon the results of much monographic work as well as upon the varied stores of economic theory. There is no suggestion of a finished state either in economic science or in economic institutions. Professor Edie shows us how to acquire knowledge rather than what to believe. Divergent as are the ideals of what an introduction to economics should offer, I think that Professor Edie's work will commend itself to a wide public. I am sure that every teacher who adopts this book will learn much from it himself, and that every layman who reads it will find. that economics, even in its present stage, makes life more intelligible and more interesting. |