Chapter 2 Preface to the Eighth Edition of the Original Book

This edition is a reprint of the seventh edition, which is more or less a reprint of the sixth edition, with minor changes.The preface of this edition is almost the same as that of the seventh edition. Thirty years have passed since the first edition of this book contained the promise to complete it with a second volume in due time.However, the scale of my project was too large. Since the modern industrial revolution far exceeds the speed and scope of the changes of a century ago, the scope of this project-especially the practical aspect-is as large as It is promoted and expanded day by day.So, before long I had to give up hope of completing the book in two volumes.My subsequent plans have been changed more than once; partly because of developments, partly because of other work to do and my failing energy.

Industry and Trade, published in 1919, was actually a continuation of this book. The third (on the future of trade, finance, and industry) is much more advanced.I intend to deal, as best I can, with all the major problems of economics in these three volumes. This book, therefore, remains a general introduction to economics; in some respects, though not in all at the top of the volumes they wrote on economics.This book does not deal with such special topics as currency, market organization, etc., while such topics as industrial organization, employment, and wage problems are mainly studied in their normal state.

Economic evolution is gradual.Its progress was sometimes halted or regressed by political events, but its forward movement was by no means sudden; for, even in the West and Japan, it was based on habit, partly conscious and partly unconscious.Although a genius inventor, organizer, or financier seems to be able to change the economic organization of a nation in one fell swoop, his influence, which is not purely superficial and temporary, can be seen after investigation, and it is nothing more than making Widespread constructive development, long in preparation, has reached maturity.Of the manifestations of nature, those which occur most frequently, and which are so well organized as to be carefully observed and closely studied, are the basis of most other scientific investigations, as well as of economic research, while those which come and go Specific, rare, and difficult-to-observe manifestations are often reserved for special research at a later stage. The adage "nature cannot leap" is especially true for a fundamental book on studying economics.

The contrast between these two different manifestations is exemplified by the distribution of studies of large enterprises in this book and in Industry and Trade.In any branch of industry which offers open opportunities to new enterprises which develop into first-rate enterprises and which, after a considerable period, perhaps decline, the normal costs of production in this branch of industry can be calculated according to the "a typical enterprise" Assessed in the light of the situation, the so-called representative firm is that which enjoys a large part of the internal economy - which is owned by well-organized individual firms - and the general or external economy resulting from the common organization of the whole area.It is appropriate that the study of such enterprises falls within the scope of the Book of Research Foundations.The study of a well-established monopoly in the hands of a government department or a great railroad company, on which its prices are adjusted, is, it is true, chiefly for its own revenue, but also to some degree also for the interest of its customers, the study of which belongs to the It is also appropriate to study the scope of the basic book.

But when trusts are striving to control a vast market, when groups of like interests are being formed and dissolved, and especially when the policy course of any particular enterprise is not governed solely by ideas with regard to the success of its own business, Rather, when subject to the manipulation of a large stock market or some kind of market-controlling movement, normal activity is shunned.This kind of question cannot be properly dealt with in a book on the foundation; it falls within the scope of a book on a certain part of the superstructure. Economists should aim at economic biology, not economic mechanics.

However, the concept of biology is more complicated than that of mechanics; therefore, books on the basics of research must pay greater attention to the similarity in mechanics; and the term "balance" is often used, which implies a static similarity.This fact, as well as the normal state of modern life that this book pays special attention to, both imply that the central concept of this book is "static" rather than "dynamic".But, in fact, the book is always a study of the forces that cause development, and its tone is dynamic rather than static. However, the number of forces we have to study is so great that it is best to study several forces at once, and to formulate several partial solutions to assist our main investigation.Thus, we first study alone the preliminary relation of supply, demand, and price of a particular commodity.We use the phrase "ceteris paribus" to treat all other forces as inactive: we do not consider them useless, but simply ignore their activity.This scientific method predates science, and has been employed, consciously or unconsciously, by intelligent men since ancient times in the study of every difficult problem of everyday life.

In the second stage, more forces come into play than were originally assumed to be inactive: changes in the conditions of demand and supply of particular kinds of commodities come into play, and we begin to appreciate the complexity of these conditions. interactions are observed.Gradually, the scope of the dynamic problem is enlarged, and the scope of the temporarily static assumption is narrowed; finally, the great central problem of the distribution of the national income among the many different factors of production is approached.At the same time, the principle of dynamic "substitution" is often at work, so that the demand and supply of any kind of factors of production are indirectly affected by the development of supply and demand of other factors, even if these factors belong to unrelated industrial sectors.

Economics, then, is primarily the study of human beings who are compelled to demand change and progress, for better or for worse.The static assumption of fragments is used to temporarily aid dynamic—or rather biological—concepts.But the central concept of economics must be that of energy and motion, if only in the study of its foundations. There have been periods in social history in which the characteristics of the income generated by landed property have dominated human relations; these characteristics may predominate emphatically.But in modern times, the development of new lands, combined with the cheapness of water transport, has almost prevented the tendency to diminishing returns--in the sense that Malthus and Ricardo used the term diminishing returns, when the English laborer's weekly income Wages are often less than the price of a half bushel of good wheat.But if the growth of population continued for a long time, even at a quarter of its present rate of growth, the total value of rent from all uses of the land (assumed to be as unrestricted by the authorities as at present) would probably be greater than that from other lands. The total revenue earned by all forms of material property; even though these properties might then embody twenty times as much labor as they do now.

In successive editions (up to the eighth) of this book, increasing emphasis has been placed on the above fact; and on the correlative fact that in every branch of production and trade there is a margin within which , an increase in the use of any factor of production is beneficial under certain conditions; however, beyond this margin, any increase in the use of a factor of production will produce diminishing returns, unless there is an increase in demand, and at the same time The other factors of production to be used together with a certain factor of production also increase appropriately.Equally increasing attention has been paid to the supplementary fact that this notion of the margin is not uniform and absolute: it varies with the conditions of the problem under study, and especially with the length of time to which it is concerned. Variety.The laws about it are general, namely:

(1) Marginal cost does not determine price; (2) The role of forces determining price can only be clearly shown on the margin; (3) The margin must be studied on the basis of long-term and lasting results, and The margins studied by momentary fluctuations are different in nature and scope. The difference in the nature of marginal costs does give rise to the well-known fact that, among the effects of an economic cause, those which are not easily detected are often more important than those which are superficial and attract the attention of the casual observer. important, and in the opposite direction.This is one of the chief and troubling difficulties in past economic analysis; the full importance of which, I am afraid, has not been generally recognized, and before it is fully understood we may have to Do much more work than you do now.

This new method of analysis tried gradually and tentatively to apply to economics the methods of a small incremental science (commonly called differential calculus), as far as the very different nature of the economic material allowed.Most of the reasons why we have been able to control the nature of nature in modern times are directly or indirectly due to this method.This new method of analysis is still naive; it has no dogma or orthodoxy.Sufficient time has not yet passed to obtain a fully settled set of terminology; so differences of opinion as to the most proper use of terms, and other subsidiary questions, are a sign of normal development.In fact, however, among those who were actively engaged in research by this new method, especially among those who had studied the simpler and more definite, and therefore the higher, problems of physics, the fundamentals of the method showed There is remarkable harmony and consistency.Although this method is not suitable for many economic studies, the important part is in a dominant position, and there is no need to wait until the next generation, and there will probably be no more disputes. My wife has given me help and hints throughout the various stages of this book's reprints.Each edition is greatly indebted to her advice, care, and insights.Dr. Cairns and Mr. Price reviewed the first edition, and were of great help to me; Mr. Fulux also helped me a lot.Among the many people who helped me with particular problems at certain places in the editions, I owe special thanks to Ashley, Kenan, Edgeworth, Haverfield, Pigou, and Tausig Professor; and Dr Berry, Mr Fahey and the late Professor Sidgwick. In October 1920, at No. 6 Mantinole Road, Cambridge