Louis F. Post

“ All Economic details, from least to greatest, from simplest to most complex, from most familiar to most mysterious, throughout the labyrinthine intricacies of the Productive Process in Economics, are like the details in the Economic history of the house-wife’s needle of our illustration. What the points of the compass are to navigation, or the four fundamental divisions of arithmetic to mathematics, such are the three Basic Facts to the Productive Process in Economics. ”

“ Beneath that surface we first find Trade, for which Money is the medium or the means of expressing relative values and adjusting balances. Trade consists essentially in interchanges of commodities, inclusive of natural resources and of human service. It is not an arbitrary custom or set of customs, but a phenomenon of natural law through which artificial objects are produced to completion and final delivery. But Trade, though lying beneath the Money surface of Economics, is not a basic fact of that science. ”

“ The ripened grain ready for harvest is Capital in turn, for it, too, is Wealth to be utilized in the production of more Wealth—bread or seed or both.
And so of mechanisms, which grow not as seeds do but only as the hand of the mechanic coaxes them into shape. When, for example, a machine which aids in the flouring of grain is produced, he who owns the machine owns Capital. He has saved it by putting purchasing power into a productive implement instead of putting it into ultimate products for his own consumption. Owning the machine, he owns bread-producing Capital. ”

“ The only thinkable relation of theft to Economics is analogous to the relation of murder to the human race. That Economic study may comprise considerations of how to exclude stealing from Economic customs, does not go to prove that stealing is a factor in Economic science. It goes no farther than to prove that stealing may become an Economic parasite.
Even as a parasite, stealing could hardly have wormed its way to the Economic border line, much less across it, but for a disposition among advanced students to confuse normal Economic phenomena with arbitrary business customs. ”

“ But division of Labor would be useless were it not for Trade. Each of those frontiersmen must trade his share in the other’s habitation for the other’s share in his habitation; each of those messengers must exchange his claim to compensation for delivering one of the other’s two messages for the other’s claim to compensation for delivering one of his. This, then, is the sum and substance of Trade in Economics—adjustments of compensation for specialized Production through division of Labor. ”

“ It, too, identifies Economics and legitimate Business; for only through legitimate Business activities can cooperative mankind make a living. It, too, excludes theft in all its forms and guises; for so much of a living as some may make by any kind of theft, others must lose as victims of theft. It, too, brings Economics on the surface and Business on the surface within the definition of “the science of making money;” for only by means of money measurements in money terms does or can mankind in the mass make its living. ”

“ But by what right could Government levy upon Rent only if its claims to an income are as a producer of Wealth functioning in the category of Labor, the natural compensation for which is not Rent but Wages? ”

“ What counts in Economic measurements is Money denominations—Money language rather than Money pieces. For in the world-wide processes of trade, only a slight proportion of either metal coin or paper currency passes from hand to hand. Nearly all Money measurements are entered in books of account; and in these the debits and the credits so nearly offset one another, by and large, that the difference as a whole is too slight for consideration in passing down from the Money surface of Economics to the basic facts. A common and impressive exemplification is afforded by clearinghouse statistics. ”

“ The essential Economic difference between Production and Consumption is that Production alters natural objects so as to adapt them to the satisfaction of human wants, whereas Consumption alters Artificial Objects in the process of satisfying those wants. Production is the drawing forth by Man of Artificial Objects from and upon Natural Resources; Consumption is the passing back by Man of Artificial Objects to Natural Resources.
With the processes of Consumption the science of Economics has nothing to do. Its functions end with delivery to final consumers. ”

“ Whether the surplus of Production or possible Production be called Rent for Land, or deductions from Wages for superior opportunities to Labor, or be otherwise distinguished from Wages for Labor, it none the less exists as a distinct and natural allocation of Wealth produced from and upon Land by Labor. Although Rent depends wholly upon Labor for its Production it is a differential gain in Wealth which is due not to superior productiveness of Labor but to relative superiority of different kinds and locations of Land. ”

“ However useful in business accountings, which concern only the private interests of business proprietors, they are intolerable in the science of Economics, which concerns not only a proprietor, nor every proprietor, but all mankind. ”

“ Yet systematic Economic thinking assigns every Economic detail to three categories which can be studied without risk of confusion. It need hardly be again explained that those three categories are Labor, Land and Wealth. Every constituent of such a habitation, no matter how minute, is assignable for primary Economic study to one or another of those Basic Facts—to Land for the site, and for all the rest, from architectural designing to decorative completion, to composites of Land and Labor. ”

“ Let the principle be tested by Money measurements. Will any sane man pay $100 to satisfy any Economic desire of his which he knows he can satisfy as perfectly for $75, or $80, or $90, or even more than $90 so it be less than $100? Certainly not. Then the Economic law in question may be expressed in terms of Money. Instead of saying that men seek to satisfy their Economic desires with least exertion, we may express the same natural law by saying that men seek to satisfy their Economic desires at the lowest Money cost. ”

“ Trade is an essential part of the Productive Process in Economics. It is inseparable from Labor specialization. If some Labor be devoted to the Production of one kind of Artificial Objects, one kind of Wealth—food, for instance—the producers of such Wealth must satisfy their desires by trading with other kinds of Labor specialists—clothing producers, for instance—for what the latter make and the former do not make. Evidently, then, the more minutely Labor takes on specialized activities, the more extensive and intensive must Trade become. ”

“ The first Basic Fact—not first in order of creation, but first in our perceptions of Economic necessity—is Man. Without Man, Economics could have neither incentive nor power, neither cause nor effect.
The second Basic Fact is Natural Resources, without which Man could not exist. Natural Resources comprise the surface of our globe, together with all natural objects external to Man and in their natural condition, upon the surface, under the surface, and above the surface, including the air surrounding the surface. ”

“ He who produces from and upon better grades will naturally achieve greater or better results with the same expenditure of Labor than he who produces from poorer grades. This difference is measureable by variations in the productive grades of Land, from nothing in excess of production cost on the lower side of the Margin of Production—the poorest in demand, the Economic frontier—to something in excess of production cost on the higher side of the Margin, the hither side of the Economic frontier, and to more and more for higher and higher grades up to the best. ”

“ As human services naturally tend to exchange at par for equally desirable human services, so do different forms of Wealth, each product of human service, tend to exchange at par for equally desirable forms of Wealth; and as Wealth in the Rent category and Wealth in the Wages category are alike service-products of Labor applied to Land, exchanges of every kind of Wealth tend to be effected on the basis of equality in the expenditure of Labor for their Production. ”

“ Springing out of a manifestation of natural law which is rightly distinguished in Economics as “division of labor,” and thus inspiring and facilitating specialization in the Production of Wealth, Trade is a natural phenomenon. Within manifest limits and without extra exertion two producers can produce more than twice as much as one, four more than twice as much as two, and so on, subject only to the limitations of Natural Resources. By exchanging products they therefore naturally multiply their productive powers. ”

“ Though we measure service-value by Money, though Money fluctuates as a Value-measuring device, though some individual services fall in product value relatively to the productive power of service, though some individual services may increase in Value for one reason or another, there is nevertheless a Value level in Trade which tends constantly to maintain an equilibrium between service-value and service-utility. Money-measured Value and Money standards of Value may rise above or fall below the service-cost of produced commodities. ”

“ Why does mankind crave Labor-saving methods for producing Artificial Objects from and upon Natural Resources, if there be no law of human nature which impels mankind to seek satisfaction of Economic desires with least exertion? ”

“ And except by operation of natural law, how do men’s bodies grow? Is it enough to answer that the growth of the body is a problem of physical science, which is subject to natural law, whereas Economic science contemplates a lawless lot of phenomena? ”

“ Business arts and customs which conflict with natural Economic law are as certain to culminate in disaster as is the life of a man who, approaching a wide and deep chasm, attempts to walk across it without a bridge. ”

“ Production in advance of actual demand indicates nothing more than that the producers are confident that such demand exists in embryo. If they err, the Products have no market; if they have guessed aright, the volume of Products increases to meet the demand. By and large, then, demand for Consumption regulates Production; or, in Economic phrasing, supply in Production is determined by demand for Consumption.
Being continuous, the human demand for Artificial Objects to consume stimulates continuous Production; being progressive, it promotes improvement in Productive methods and accomplishments. ”

“ Whatever a Personal Servant may do for a commodity specialist which otherwise the specialist must do for himself at the cost of contributing less to the production of tangible commodities, is to that extent a contribution to the production of those commodities. Interchanges of human service, if the interchangers act in freedom, each getting from the channels of Trade the equivalent in service of the service he renders, are contributions to Economic production. ”

“ Presumably, then, as Production of Wealth has two Basic factors—in technical terms Labor and Land, in other terms Man and Natural Resources—so Distribution of Wealth has two basic apportionments, one corresponding to the Labor or Man factor in Production, the other to the Land or Natural Resource factor—Wages for Labor, Rent for permission to use Land.
That there can be neither Wages for Labor nor Rent for Land unless Wealth has been produced, is a manifest law of nature. The nonexistent being naturally indivisible, Production of Wealth must precede Distribution of Wealth. ”

“ Individual deliveries, in contrast with Distribution into the two basic categories, Wages and Rent, consist in the delivery of Wealth to individuals in proportion to the effective demands of each. Their demands are limitless, for when satisfied with quantity they naturally demand quality. But there is a limit to all effective demands. The limitation on the one hand is the producer’s ability to produce, and on the other the consumer’s ability to obtain in Trade. Ability to produce depends in high degree at any time upon the general productive knowledge of the time. ”

“ To the degree that governments faithfully exercise their legitimate public functions and refrain from interfering with legitimate private functions, they contribute to the Productive Process. This is demonstrated by observable Economic results. Wherever Government approximates a realization of its functions, Economic conditions are manifestly better than where it neglects or abuses them. Evidently, then, Government is a form of human service which, like all other human service forms, belongs as an Economic factor in the Labor category. ”

“ This exclusion is not for moral reasons, it may be well to interject for the benefit of such advanced students of Economics as recoil from mixing moral principles with Economic science. It is due to the fact that exchange, or trade—an essential element in Economics,—is in theft utterly lacking.
In the Economic sense, making money is making it for all concerned in any particular process, and not for one or more of the parties at the expense of the others. No art of getting something for nothing can be within the scope of Economic science. ”

“ They do so in terms of Price when measured by Money; they do so in the essentials of Value when measured by comparisons of commodities. As a rule, however, Money-prices are fair guides to Commodity values. Commodity values rise and fall according to cost of production, inclusive of delivery; and in so far as Money is stable, the rise and fall in prices is evidence of variations in production cost.
The relative rise and fall in Value, be it measured by prices in Money or otherwise, is so common a phenomenon of Trade that critics might be pardoned for denying a Value level. ”

“ What is legitimate Business but human service? And what else in Economic classification fundamentally can human service be but Labor? Business is in the Man class of Economics in contradistinction to the Natural Resource class and the Artificial Objects class. ”

“ The last person in all the world from whom to get the basic facts of Economics is the business specialist, for he habitually limits his observations to his own specialty. Perhaps, however, a certain type of Economic teacher may be equally untrustworthy in that respect—the teacher who, though he imitates the physical scientist in devotion to details, disregards the physical scientist’s fidelity to the relations of cause and effect. ”